P2P lending and Natural Disasters: Is Altruistic Behavior conditional?

2023 | International Conference on Information Systems | Citations: 0

Authors: Agrawal, Lavlin; Sharman, Raj; Tiu, Christian; Joenväärä, Juha

Abstract: In the aftermath of natural disasters, borrowers seeking credit from traditiona ... Expand

Abstract: In the aftermath of natural disasters, borrowers seeking credit from traditional sources, such as banks, may encounter higher interest rates than in pre-disaster periods. We examine the lending behavior of peer-topeer (P2P) platforms in the wake of disasters. Since P2P platforms involve individual investors in making lending decisions, they accommodate both profit motives and empathetic responses. Empirical evidence from psychology suggests that empathy can lead to prosocial behavior. Consistent with this assertion, we find that loans affected by natural disasters have lower interest rates than comparable loans not issued in the wake of disasters. Our study finds that lenders are involved in a prosocial behavior and are ready to give away some part of their interest income to help the communities in need. Collapse

Topics: crowdsourcing natural hazard peer-to-peer lending peer-to-peer model LendingClub

Methods: instrumental variables estimation experimental group sensitivity analysis ordinary least square robustness check

Decision support systems in crowdfunding: A fuzzy cognitive maps (FCM) approach

2023 | Decision Support Systems | Citations: 0

Authors: Borrero-Domínguez, Cinta; Escobar-Rodríguez, Tomás

Abstract: Crowdfunding as an alternative source of finance to banking is the subject of nu ... Expand

Abstract: Crowdfunding as an alternative source of finance to banking is the subject of numerous research works. This research proposes the guidelines of a Decision Support System (DSS) in the area of crowdfunding based on a Fuzzy Cognitive Maps (FCM) approach. A framework consisting of three phases (ten steps) has been proposed to design the guidelines of a DSS in crowdfunding. The first phase focusses in the construction of the FCM. FCMbased scenarios have been built in the second phase. Finally, in the third phase the guidelines of the DSS in crowdfunding have been defined. Results show that DSS using FCM-based scenarios could be useful tools to promoters, funders and managers of crowdfunding projects. Collapse

Topics: crowdsourcing crowdfunding decision support system decision making innovation management

Methods: simulation

Promise not fulfilled: FinTech, data privacy, and the GDPR

2023 | Electronic Markets | Citations: 0

Authors: Dorfleitner, Gregor; Hornuf, Lars; Kreppmeier, Julia

Abstract: This article analyzes how the General Data Protection Regulation (GDPR) has affe ... Expand

Abstract: This article analyzes how the General Data Protection Regulation (GDPR) has affected the privacy practices of FinTech firms. We study the content of 276 privacy statements respectively before and after the GDPR became binding. Using text analysis methods, we find that the readability of the privacy statements has decreased. The texts of privacy statements have become longer and use more standardized language, resulting in worse user comprehension. This calls into question whether the GDPR has achieved its original goal—the protection of natural persons regarding the transparent processing of personal data. We also link the content of the privacy statements to FinTech-specific determinants. Before the GDPR became binding, more external investors and a higher legal capital were related to a higher quantity of data processed and more transparency, but not thereafter. Finally, we document mimicking behavior among FinTech industry peers with regard to the data processed and transparency. Collapse

Topics: legal context General Data Protection Regulation privacy electronic finance website

Methods: parametric test paired t-test descriptive statistic Student's t-test qualitative content analysis

Theories: privacy calculus theory

Numerological Heuristics and Credit Risk in Peer-to-Peer Lending

2023 | Information Systems Research | Citations: 0

Authors: Hu, Maggie Rong; Li, Xiaoyang; Shi, Yang; Zhang, Xiaoquan (Michael)

Abstract: Heuristics are mental shortcuts that have ubiquitous influences on decision maki ... Expand

Abstract: Heuristics are mental shortcuts that have ubiquitous influences on decision making. We investigate whether and how different heuristics have distinct effects in the context of peer-to-peer (P2P) lending. Drawing on theories on the roles that heuristics play in decision making, we conjecture that when borrowers use different heuristics based on distinct motives to set their loan amounts, their funding success and repayment performance also differ. Using detailed P2P lending data from a Chinese P2P lending platform, we examine two important numerological heuristics, the round-number heuristic and the lucky-number heuristic, which are observable in over 80% of the submitted loan amounts. We find that round-number loans are less likely to get funded and exhibit poor repayment performance after being funded, whereas lucky-number loans exhibit the opposite pattern. These findings, which we attribute to the different motives behind the borrowers’ heuristic choices, challenge the conventional understanding that generally treats all heuristics as behavioral biases. Our results are robust to various identification strategies, including coarsened exact matching and instrumental variable estimation. Our paper sheds new light on the heterogeneity of heuristics and their distinctive implications for the credit market. History: Sam Ransbotham, Senior Editor; Tianshu Sun, Associate Editor. Funding: This work was supported by the Research Grants Council, University Grants Committee [Grants GRF 14500521, GRF 14501320, GRF 165052947, TRS:T31-604/18-N]. Supplemental Material: The internet appendices are available at https://doi.org/10.1287/isre.2023.1202. Collapse

Topics: crowdsourcing internet technology peer-to-peer lending peer-to-peer model decision making

Methods: instrumental variables estimation machine learning Student's t-test parametric test survival analysis

Theories: theory of bounded rationality

Identity mediation strategies for digital inclusion in entrepreneurial finance

2023 | International Journal of Information Management | Citations: 0

Authors: Kromidha, Endrit

Abstract: Digital platforms and innovations have greatly improved the mechanisms whereby t ... Expand

Abstract: Digital platforms and innovations have greatly improved the mechanisms whereby the resources needed to start a business can be obtained; yet many at the base of the pyramid still have limited access to them because they remain disconnected. While digital platforms can help to connect the possessors of resources with the entre­ preneurs who need them, the mediating processes that those who are not directly represented in such digital spaces need to undergo deserve further attention. This study builds on social identity theory and the identitybased view by considering identity as a relational and resource construct and discussing three identity media­ tion processes and strategies: connection-, familiarity-, and credibility-building. The evidence for this study was sourced from Rang De, India’s first digital micro credit platform. Understanding the identity mediation whereby disconnected borrowers seeking finance can access resources provides important insights to the emerging field of digital social innovation for business and development. Collapse

Topics: digital platform crowdsourcing entrepreneurship crowdfunding digital transformation

Methods: qualitative interview theoretical contribution theory development longitudinal research survey design

Theories: social identity theory social capital theory theory of affordance

How Lending Experience and Borrower Credit Influence Rational Herding Behavior in Peer-to-Peer Microloan Platform Markets

2023 | Journal of Management Information Systems | Citations: 0

Authors: Lowry, Paul Benjamin; Xiao, Junji; Yuan, Jia

Abstract: This paper analyzes the herding behavior that characterizes lenders' lending dec ... Expand

Abstract: This paper analyzes the herding behavior that characterizes lenders' lending decisions on a microloan platform and explains how rational herding behavior can resolve the information-asymmetry problem, which is a well-known reason for the failure of online microloan platforms. Using a set of panel data on individual lending decisions acquired from Paipaidai.com (PPDai), an online microloan platform, we examine the influence of the lending decisions of prominent, experienced lenders on novice lenders to identify rational herding behavior. Our empirical analysis demonstrates that rational herding behavior can in fact efficiently reduce lender loss from borrower defaults caused by limited information. Although it is typically assumed that herding behavior is irrational, we find that it can be rational in this context and can thus shed light on why PPDai has succeeded while most other microloan platforms have failed. Accordingly, we make three key contributions: 1) we use heterogeneous herding effects to empirically determine whether lenders' herding behavior on PPDai is rational based on observational learning; 2) we investigate the moderating effect of borrower credit and novice-lender experience on herding, and we leverage this heterogeneity in lender experience to better explain loan results; and 3) because PPDai publicly provides potential lenders with a transparent credit score—in contrast to platforms like Prosper.com, which leverage hidden proprietary credit information from Experian—we further analyze the credit composition of prominent lenders to better understand the crucial determinants of rational herding. In fact, our follow-up survival simulations indicate that without rational herding, the total number of successful PPDai loans would have decreased by around 46 percent during the study period—a finding that further underlines the crucial influence of rational herding and the unique contextual factors of PPDai that have fostered it. Collapse

Topics: peer-to-peer model decision making peer-to-peer lending crowdsourcing data breach

Methods: simulation survival function proportional hazards model longitudinal research hazard function

Theories: lemon market theory loss aversion

Digital Multisided Platforms and Women’s Health: An Empirical Analysis of Peer-to-Peer Lending and Abortion Rates

2023 | Information Systems Research | Citations: 0

Authors: Ozer, Gorkem Turgut; Greenwood, Brad N.; Gopal, Anandasivam

Abstract: Digital multisided platforms and peer-to-peer marketplaces are increasingly attr ... Expand

Abstract: Digital multisided platforms and peer-to-peer marketplaces are increasingly attracting attention from scholars, with a significant amount of work examining their societal implications. Despite such focus, limited work has investigated the social implications of the democratization of capital by peer-to-peer (P2P) lending platforms, particularly within the healthcare sector, where financial constraints can be daunting. In this study, we investigate the effects of P2P lending platforms on local abortion rates, a medical procedure characterized by significant financial barriers and social stigma. Leveraging the entry of the P2P platform LendingClub into different states at different times, and a differences-in-differences approach, we find that the entry of LendingClub is associated with an increase in the rate at which women choose not to carry to term. Further, results indicate the effects vary based on the characteristics of the local area, with stronger effects manifesting in more religious areas and areas with lower levels of education, suggesting that social frictions in the form of stigma and knowledge asymmetries can influence financial need. Theoretical and practical implications are discussed within.History: Ram Gopal, Senior Editor; Yan Huang, Associate Editor.Supplemental Material: The e-companion is available at https://doi.org/10.1287/isre.2022.1126. Collapse

Topics: crowdsourcing peer-to-peer lending Prosper LendingClub peer-to-peer model

Methods: qualitative interview longitudinal research difference in differences experimental group robustness check

Shaping crowdlending investors’ trust: Technological, social, and economic exchange perspectives

2023 | Electronic Markets | Citations: 0

Authors: Perdana, Arif; Jutasompakorn, Pearpilai; Chung, Sunghun

Abstract: The rise of crowdlending enables small firms to borrow capital where transaction ... Expand

Abstract: The rise of crowdlending enables small firms to borrow capital where transaction costs are reduced and financial accessibility is improved. Crowdlending platforms require lenders to depend solely on the information provided by its borrowers. Such information reliance could impact lenders’ financial behavior and investment decision and return. In this study, we develop a model to understand what elements and factors influence the formation of trust in crowdlending. Our results suggest that lenders are likely to pay more attention to platform quality and risk mitigation strategy than attractive loan cues. Our findings can aid the crowdlending industry in growing its investor base and increasing potential customers’ access to capital. These findings could also assist in developing regulatory guidelines in the crowdlending market. Collapse

Topics: crowdsourcing peer-to-peer lending crowdfunding risk management social influence

Methods: survey partial least squares path modeling computational algorithm descriptive statistic partial least squares regression

Putting Religious Bias in Context: How Offline and Online Contexts Shape Religious Bias in Online Prosocial Lending

2023 | Management Information Systems Quarterly | Citations: 0

Authors: Sabzehzar, Amin; Burtch, Gordon; Hong, Yili; Raghu, T. S.

Abstract: Biases on online platforms pose a threat to social inclusion. We examine the inf ... Expand

Abstract: Biases on online platforms pose a threat to social inclusion. We examine the influence of a novel source of bias in online philanthropic lending, namely that associated with religious differences. We first propose religion distance as a probabilistic measure of differences between pairs of individuals residing in different countries. We then incorporate this measure into a gravity model of trade to explain variation in country-to-country lending volumes. We further propose a set of contextual moderators that characterize individuals’ offline (local) and online social contexts, which we argue combine to determine the influence of religion distance on lending activity. We empirically estimate our gravity model using data from Kiva.org, reflecting all lending actions that took place between 2006 and 2017. We demonstrate the negative and significant effect of religion distance on lending activity, over and above other established factors in the literature. Further, we demonstrate the moderating role of lenders’ offline social context (diversity, social hostilities, and governmental favoritism of religion) on the aforementioned relationship to online lending behavior. Finally, we offer empirical evidence of the parallel role of online contextual factors, namely those related to community features offered by the Kiva platform (lending teams), which appear to amplify the role of religious bias. In particular, we show that religious team membership is a double-edged sword that has both favorable and unfavorable consequences, increasing lending in general but skewing said lending toward religiously similar borrowers. Our findings speak to the important frictions associated with religious differences in individual philanthropy; they point to the role of governmental policy vis-à-vis religious tolerance as a determinant of citizens’ global philanthropic behavior, and they highlight design implications for online platforms with an eye toward managing religious bias. Collapse

Topics: electronic market online community crowdsourcing crowdfunding peer-to-peer model

Methods: robustness check descriptive statistic qualitative content analysis survey archival research

Theories: theory of economic growth

Can Social Disconnectedness Inhibit Online Trade? Examining the Effects of Digital Distance on Peer-to-peer Lending

2023 | International Conference on Information Systems | Citations: 0

Authors: Sabzehzar, Amin; Zhou, Yingxin; HOU, JINGBO

Abstract: The extant literature has shown that offline group proximity manifests in onlin ... Expand

Abstract: The extant literature has shown that offline group proximity manifests in online peer-topeer lending platforms, inhibiting online transactions in those markets. The findings of this research suggest that digital distance, as measured by the rate of Facebook friendship between country pairs, can also influence lending actions in bi-country lending. Building on a dataset from Kiva.org, we show that digital distance significantly and negatively affects bi-country lending actions, on top of other distance-related barriers discussed in the literature. The results also shed light on the role of government policies regarding local IT infrastructure and Internet freedom, revealing that greater levels of IT infrastructure and Internet freedom can compensate for the negative effect of digital distance on prosocial lending. Collapse

Topics: internet technology information technology infrastructure Facebook crowdsourcing virtual teamwork

Methods: descriptive statistic regression analysis method