Essays on the peer-to-peer lending markets


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Gao, Ge (2022). Essays on the peer-to-peer lending markets. University of Birmingham. Ph.D.

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Peer-to-peer (P2P) lending creates an environment in which lenders and borrowers are directly matched without financial intermediary. Since the first P2P platform was founded in 2005, it has been one of the most emerging FinTech innovations. Transparency Market Research indicates that the potential market volume of global P2P market will be worth $897.85 billion by 2024. The unsecured loans funded by individual investors play profound roles in the alternative banking system. This doctoral thesis uses three empirical chapters to investigate the P2P lending market from both lenders and borrowers perspectives.

The first chapter investigates expert bidding imitation in peer-to-peer lending platforms. Differs from herding behaviour which associates certain actions of an individual to those of the whole crowd, we question whether an individual’s bidding behaviour is related to the decisions made by expert. The experts are defined as investors who either have more central roles or who spend more time or money on the network. We employ data from, which contains information of about 170,000 investors who placed almost four million bids on 111,234 loan listings from 2010 to 2018. Our dataset suggests that an average investor mimics the bids of expert lenders. Inactive lenders learn top investors’ lending behaviour through observational learning and then follow their actions, although they do not know the experts’ identity. Finally, we show that experts rarely imitate other experts, yet they exhibit herding behaviour.

The second chapter examines the reaction of individual investors to news arrival. In particular, we explore how Spanish COVID-19 (C19) information affects decisions of European investors holding Spain originated P2P loans. This study employs loan transaction data from Bondora secondary market, one of the leading P2P lending platforms in continental European. We find that asset holders react to the ongoing Spanish official C19 announcements by reducing asset prices. Also, the higher agreement on asset valuation between sellers and buyers is attributable to the ascending infections. Interestingly, investors process more country-wide C19 information compared to regional updates. This could be explained by the insufficient European media attention to Spanish region-level C19 topics. Moreover, the lockdown enhances the negative effects of C19 crisis. In addition, the dispersion of asset valuation between sellers and buyers is constricted in response to the ongoing cases.

The third chapter uncovers the impact of public holiday on the investor attention on financing issues in P2P markets. Differs from typical financial markets such as stock and futures market, P2P market never closes. Therefore, P2P platforms create a unique environment which allows investors to trade and invest in public holidays. Using unique datasets obtained from and, two prominent peer-to-peer lending platforms in China and continental Europe, our estimation suggests that the celebration of holiday increases the investor inattention as the investor decision time delays during public holidays. Also, the investment performance tends to decrease under limited investor attention. The mismatch on the asset valuation between sellers and buyers on asset valuation also expands during the holidays.

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: Economic and Social Research Council
Subjects: H Social Sciences > HB Economic Theory
H Social Sciences > HG Finance


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