Voluntary disclosure in P2P lending: Information or hyperbole?

Chao Wang, Junbo Wang, Chunchi Wu, Yue Zhang*

*Corresponding author for this work

Research output: Journal Publications and ReviewsRGC 21 - Publication in refereed journalpeer-review

7 Citations (Scopus)

Abstract

Using a robust textual analytic method, we decompose the P2P loan description into common and distinctive contents, which contain general and unique information provided by borrowers. We then investigate the role of the distinctive content in affecting P2P lending decisions and outcomes. Controlling for loan/borrower characteristics, loan applications with more distinctive content are more likely to be funded, and have larger amounts and longer maturity, but these loans carry higher interest rates and default probability. Overall, the evidence suggests that borrowers use self-reported loan descriptions to hype their loan applications rather than provide soft information to reduce information asymmetry. © 2023 Published by Elsevier B.V.
Original languageEnglish
Article number102024
JournalPacific Basin Finance Journal
Volume79
Online published5 Apr 2023
DOIs
Publication statusPublished - Jun 2023

Research Keywords

  • Default probability
  • Distinctive content
  • Hype
  • Loan description
  • Peer-to-peer lending

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