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What are the determinants of lending decisions for Chinese Peer-to-Peer lenders?

Meng, F. (2016) What are the determinants of lending decisions for Chinese Peer-to-Peer lenders?

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Abstract:Online peer to peer lending is an emerging and essential financing approach for small and micro enterprises. Over the past years, Chinese P2P lending market has developed very fast, and has become the largest market in the world. With such a rapid growth, inherent risk has also increased, especially for lenders. Prior researches summarize that P2P lenders suffer from information asymmetry, which is a fundamental and severe problem. From a lender’s perspective, information asymmetry not only occurs between borrowers and lenders, but also between platforms and lenders. As a consequence, it would decrease lenders’ trust on platforms/borrowers, and may lead to considerable obstacle to the development of online P2P market. To resolve it, this research aims to discover the most important determinants for Chinese lenders that influence their lending decisions; and give suggestions to borrowers and platforms on providing high-quality of information. This research has proposed 13 hypotheses from previous studies, where 13 factors were mentioned to have impacts on lending decision. However, most of the researches were based on American context. This work validates them with an online questionnaire conducted in China, where 241 respondents were collected. Among them, 177 were willing to lend via P2P, and 64 were not willing to lend, which we analyzed with a binary logistic regression model. According to statistical analysis outcome of this model, 8 hypotheses were consistent with prior studies, while 5 were rejected. This result suggested 5 important determinants for Chinese P2P lenders; they are factors of “verified documents”, “safety protection from platforms”, “service quality provided by platforms”, “transaction fee” and “endorsement from borrower’s friend”. The findings reveal that Chinese lenders’ willingness to lend is affected by the quality of platforms and borrowers, rather than perceived benefit. As an indication for different parties, lenders could use the factors as a checklist to judge the quality of a loan; platforms should improve services or functions as above-mentioned to create a healthier environment for the development of P2P lending; and borrowers provide as more high-quality information (i.e. verified documents) as they can. Thus, this study provided meaningful suggestions for three parties.
Item Type:Essay (Master)
Faculty:BMS: Behavioural, Management and Social Sciences
Subject:83 economics, 85 business administration, organizational science
Programme:Business Administration MSc (60644)
Link to this item:http://purl.utwente.nl/essays/71436
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