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Article: Cheap Talk? The Impact of Lender-Borrower Communication on P2P Lending Outcomes

TitleCheap Talk? The Impact of Lender-Borrower Communication on P2P Lending Outcomes
Authors
Keywordsinformation quality
lender-borrower communication
online trust
P2P lending
peer-to-peer systems
social influence
Issue Date2018
PublisherTaylor & Francis Inc. The Journal's web site is located at http://www.tandfonline.com/loi/mmis20
Citation
Journal of Management Information Systems, 2018, v. 35 n. 1, p. 53-85 How to Cite?
AbstractThe limited information provided by peer-to-peer (P2P) lending platforms often is not sufficient for lenders to determine if a borrower is trustworthy and able to repay the loan. Using a unique dataset from a P2P lending platform, which allows lenders to seek information directly from borrowers and borrowers to respond to the questions and comments, we examine the impact of lender-borrower communication on funding outcomes and loan performance. Our results show that not only the amount but also the content of such direct communication matters. Specifically, the number of lender comments is negatively associated with funding success, while the number of borrower responses is positively associated with funding success, although only comments help reduce the final interest rate. The role of the communication is even stronger for listings with poor credit grades. Moreover, lenders are influenced by other lenders’ (positive or negative) comments and the quality of the information disclosed in borrower responses can affect funding outcomes. Loan performance (e.g., default ratio), however, cannot be predicted based on the amount of lender borrower communication. This research broadens and deepens our understanding of the roles of information disclosure, social influence, information quality, and trust in economic exchanges in online settings.
Persistent Identifierhttp://hdl.handle.net/10722/261239
ISSN
2020 Impact Factor: 7.838
2020 SCImago Journal Rankings: 3.073
ISI Accession Number ID

 

DC FieldValueLanguage
dc.contributor.authorXu, JJ-
dc.contributor.authorChau, MCL-
dc.date.accessioned2018-09-14T08:54:50Z-
dc.date.available2018-09-14T08:54:50Z-
dc.date.issued2018-
dc.identifier.citationJournal of Management Information Systems, 2018, v. 35 n. 1, p. 53-85-
dc.identifier.issn0742-1222-
dc.identifier.urihttp://hdl.handle.net/10722/261239-
dc.description.abstractThe limited information provided by peer-to-peer (P2P) lending platforms often is not sufficient for lenders to determine if a borrower is trustworthy and able to repay the loan. Using a unique dataset from a P2P lending platform, which allows lenders to seek information directly from borrowers and borrowers to respond to the questions and comments, we examine the impact of lender-borrower communication on funding outcomes and loan performance. Our results show that not only the amount but also the content of such direct communication matters. Specifically, the number of lender comments is negatively associated with funding success, while the number of borrower responses is positively associated with funding success, although only comments help reduce the final interest rate. The role of the communication is even stronger for listings with poor credit grades. Moreover, lenders are influenced by other lenders’ (positive or negative) comments and the quality of the information disclosed in borrower responses can affect funding outcomes. Loan performance (e.g., default ratio), however, cannot be predicted based on the amount of lender borrower communication. This research broadens and deepens our understanding of the roles of information disclosure, social influence, information quality, and trust in economic exchanges in online settings.-
dc.languageeng-
dc.publisherTaylor & Francis Inc. The Journal's web site is located at http://www.tandfonline.com/loi/mmis20-
dc.relation.ispartofJournal of Management Information Systems-
dc.rightsThis is an electronic version of an article published in [include the complete citation information for the final version of the article as published in the print edition of the journal]. [JOURNAL TITLE] is available online at: http://www.informaworld.com/smpp/ with the open URL of your article.-
dc.subjectinformation quality-
dc.subjectlender-borrower communication-
dc.subjectonline trust-
dc.subjectP2P lending-
dc.subjectpeer-to-peer systems-
dc.subjectsocial influence-
dc.titleCheap Talk? The Impact of Lender-Borrower Communication on P2P Lending Outcomes-
dc.typeArticle-
dc.identifier.emailChau, MCL: mchau@business.hku.hk-
dc.identifier.authorityChau, MCL=rp01051-
dc.identifier.doi10.1080/07421222.2018.1440776-
dc.identifier.scopuseid_2-s2.0-85044999482-
dc.identifier.hkuros291326-
dc.identifier.volume35-
dc.identifier.issue1-
dc.identifier.spage53-
dc.identifier.epage85-
dc.identifier.isiWOS:000428861300004-
dc.publisher.placeUnited States-
dc.identifier.issnl0742-1222-

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