Essays on the impact of peer-to-peer lending

Hanif, Tanzeela (2024). Essays on the impact of peer-to-peer lending. University of Birmingham. Ph.D.

Hanif2024PhD.pdf
Text - Accepted Version
Restricted to Repository staff only until 12 August 2027.
Available under License All rights reserved.
Download (2MB) | Request a copy

Abstract

This thesis investigates whether serial borrowing from the peer-to-peer platform and increased investors' reliance on the auto investing technology of the platform reduces the friction (credit cost) in the credit market, which arises due to information asymmetry and adverse selection. This study also examines how peer-to-peer entry policy affects traditional credit providers. Chapter 1 provides the general introduction of the thesis and highlights the research problems and contributions.
Chapter 2 investigates how serial borrowing on peer-to-peer platforms alleviates information asymmetry between borrowers and lenders. The results show that serial borrowing from the platform reduces interest rate by two percentage points, and the results are more pronounced in the case of higher information opacity. The study also finds that serial borrowing significantly reduces the probability of default. The chapter addresses endogeneity concerns, conduct a battery of robustness tests and finds consistent results. The findings of the study imply that serial borrowing could be beneficial for both borrowers in terms of access to finance at lower cost and lenders in terms of increased loan quality.
Chapter 3 turns up the investment technology dimension of the peer-to-peer platform and shows that the dominant role of the peer-to-peer platform in loan screening and allocation (auto investing) reduces the information production cost of investors. Later this cost advantage is reflected in the loan price. This chapter also finds that auto investing is associated with a lower default rate. This chapter addresses endogeneity concerns and applies multiple approaches to ensure the consistency of the results. The results highlight the importance of automated data-driven technology in the credit market to overcome imperfections in the consumer credit market.
Chapter 4 uses the removal of the staggered restrictions on lending by two major peer-to-peer platforms such as Lending Club and Prosper, in US, states; this chapter shows that banks' interest in consumer loans decreases following the exposure of peer-to-peer policy. This study uses a battery of robust tests and finds a consistent result. The chapter provides regulatory insights as it sheds light on the unintended consequences of peer-to-peer entry on the stability of consumer banking. Finally, chapter 5 concludes the thesis, provides policy implications, and opens future avenues of research.

Type of Work:

Thesis (Doctorates > Ph.D.)

Award Type:

Doctorates > Ph.D.

Supervisor(s):