Essays on Peer-to-Peer Lending

Kaawach, Said (2022). Essays on Peer-to-Peer Lending. University of Birmingham. Ph.D.

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This thesis includes three empirical papers focusing on individual’s behaviour in online lending markets.

The first chapter uses unique data from a leading P2P lending platform in China, We investigate how past loan portfolio performance affects individual investors' decisions to use the auto-investing tool. The estimates suggest that poorly performing investors are likely to switch to the auto-bidding tool after a spell of investment mistakes. At the same time, good performers prefer making decisions themselves in the self-directed mode. Additionally, experience of investors plays an essential role in adopting automation. The findings also provide evidence that the auto-bidding toolbox does not discriminate against borrowers with a specific gender, marital status, and financial literacy characteristics.

The second chapter studies the impact of a funding supply shock on loan concentration. Our analysis exploits a quasi-natural experiment involving the 2017 Chinese financial announcement, which imposed restrictions on overseas transfers and transactions. This regulation influenced the money and spending power of investors on platform. Our data suggest that loans became less concentrated, inferring that investors are less likely to be attracted to listings. In particular, this disinterest is explained by the reduction in interest rates which led individuals to concentrate their attention on more profitable investments. Moreover, borrowers reduced the requested loan amounts and increased the repayment duration to gain investors' trust in repaying their money.

The third chapter investigates the impact of experience on decision making in peer-to-peer lending platforms. Our data span from October 2010 until October 2018 and is collected from The estimates suggest that experienced lenders are more likely to make suboptimal financial decisions. In particular, as investors become more experienced, they are more likely to become overconfident which makes them attempt more suboptimal financial decisions. Moreover, when investors are considered naïve or inexperienced, they are less likely to experience the impact of overconfidence on their financial outcomes. Lastly, not only are investors less efficient when bidding on loans, but they are also more likely to bid on less profitable loans compared to their portfolio performance.

Type of Work: Thesis (Doctorates > Ph.D.)
Award Type: Doctorates > Ph.D.
Licence: All rights reserved
College/Faculty: Colleges (2008 onwards) > College of Social Sciences
School or Department: Birmingham Business School, Department of Economics
Funders: None/not applicable
Subjects: H Social Sciences > H Social Sciences (General)
H Social Sciences > HB Economic Theory
H Social Sciences > HG Finance


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