Asymmetric Information, Heterogeneity and Default Risk of Financiers
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| Title | Asymmetric Information, Heterogeneity and Default Risk of Financiers
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| Author | Sun Wujun, Zhang Chuqing and Li Ruihai |
| Organization | Nanjing University Business School; Shanghai Linxin University of Commerce |
| Email | wjsun@nju.edu.cn；clearzcq@163.com；liruihai@126.com |
| Key Words | Peer-to-peer Lending; Asymmetric Information; Heterogeneity; Default Risk |
| Abstract | Using lending data from P2P platform “Renrendai” from Oct. 2010 to Jan. 2015, this paper studies the information asymmetry and default risk of financiers in P2P market with Logit and OlS model. We find that the number of optional credit certificate indicators and the description of the debt can be served as “signals” to alleviate the problem of information asymmetry in P2P market by increasing the probability of success rate and reducing default rate. Then we analyze the effect of the heterogeneity of financier on information asymmetry and find that information asymmetry is heterogeneous. Finally, the paper finds that when the heterogeneity of financier is considered, the effect of the number of optional credit certificate indicators and the description of the debt on probability is different. High-credit financiers can reduce adverse selection and improve success rate by transmitting “signal” while low-credit financiers can also improve success rate but might trigger moral hazard, which means that the default rate of the debt increases. The result suggests that P2P platforms must try their best to search financiers’ information by using big data or something else and deal with different financier with different way according to their hetrogenenity in order to prevent default risk, alleviate information asymmetry and develop the whole industry. |
| Serial Number | WP1013 |
| Time | 2016-01-08 |
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