Abstract
This paper addresses the research on investor decision-making behaviors in peer-to-peer (P2P) lending from the perspective of rationality and sensibility not only to more thoroughly examine the factors affecting P2P lending but also to contribute to P2P platform builders’ and investees’ knowledge. We test investors’ rational choice behaviors using indices such as interest rates and investees’ monthly income and test perceptual choice using the identifiable victim effect. These tests attempt to determine whether investors prefer identifiable investees and whether this identification, as measured by social distance, affects the amount of investment. The panel data collected through the experiments are used to construct Probit and Tobit models, which address a combination of rationality and sensibility. The empirical results show that investors prefer large, short-term, high-interest loans and that investors are more likely to bid for such loans. In addition, investees find it easier to obtain funding when they share similar characteristics—in particular, a birthplace, location or ethnicity—with investors. Moreover, investees find it easier to obtain more funding when they share a similar birthplace, location or occupation with investors, whereas investees with an “identifiable” educational background find securing more funding to be more difficult. Furthermore, for a specific bidding amount, there are substitution effects between occupation and location, occupation and ethnicity, birthplace and education, and birthplace and age, which make it disadvantageous to increase the similarities across those dimensions. Finally, there are complementary effects between education and occupation and between education and age. However, there is an inverted-U relationship between social distance and bidding amount that determines whether rationality or sensibility dominate investors’ decisions.
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Notes
In China, the fixed depositary interest rate is between 1.35 and 3.00 %, that of bonds (including enterprise bonds and treasury bonds) is between 2.53 and 9.1 %, that of banking financial products is between 3 and 5.76 %, and that of P2P lending is 14.78 % on average in the first half of 2015.
The experiments receive technical support from the Internet Financial Data Center (IFDC).
We performed the borrower experiments with the employee group on August 2, 2014 (July 7 on the lunar calendar), the Qixi Festival, or Chinese Valentine's Day, so we believed roses and cards would be the best incentive. The investor experiments were performed on September 5, 2014, which is just one day earlier than the Mid-autumn Festival holiday, so we choose mooncakes and cards.
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Acknowledgments
This research work was supported by the National Natural Science Foundation of China (Nos. 71431006 and 71210003), and Ministry of Education of the People’s Republic of China (No. 13JZD0016). We are grateful to the anonymous participants in the experiments for this paper and thank them for their active and serious participation. We received constructive comments from Xing-ya Bei, Fu-qiang Wang, Lu-lu Cheng, Jian-xin Wang, Jiang-hong Zeng and other participants in the semi-monthly seminars of the Business School in Central South University regarding the framework, concept and description of this paper. Most importantly, we are very appreciated for the precious comments of the anonymous reviewers. All of the remaining errors are our own. All rights reserved.
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Chen, Xh., Jin, Fj., Zhang, Q. et al. Are investors rational or perceptual in P2P lending?. Inf Syst E-Bus Manage 14, 921–944 (2016). https://doi.org/10.1007/s10257-016-0305-z
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DOI: https://doi.org/10.1007/s10257-016-0305-z