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The relationship between soft information in loan titles and online peer-to-peer lending: evidence from RenRenDai platform

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Abstract

Online peer-to-peer (P2P) lending is a central component of Internet finance. It can help borrowers raise funds quickly—a particularly useful feature for small and medium enterprises and individuals with no credit on record with a central bank. In this paper, we use data from Chinese RenRenDai lending platform to investigate the relationship between loan purpose and funding success rate. In order to identify the purpose of borrowing from the title of the loan, LDA topic model of text mining technology is applied to make classification for loan titles. Our results indicate that the purpose of the loan has a significant influence on whether the loan is successful. Ambiguity surrounding the loan’s purpose significantly reduces the likelihood of a borrower successfully securing that loan. Loan purpose for business often ensures a higher funding success rate. These results suggest that borrowers should comprehensively fill out the loan title when applying for funding via an online P2P platform. Results also suggest that online P2P platform investors do not blindly invest in others in an attempt to secure high returns.

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Acknowledgements

This work was supported by the Zhejiang Provincial Natural Science Foundation of China under Grant No. LY18G020013 and LQ14F010006, the Humanity and Social Science Foundation of the Ministry of Education of China under Grand No. 15YJA630005 and the Natural Science Foundation of China under Grant No. 61502414.

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Authors and Affiliations

  1. School of Information, Zhejiang University of Finance and Economics, 18 Xueyuan Street, Hangzhou, 310018, China

    Jianrong Yao, Jiarui Chen, Yuangao Chen & Shuiqing Yang

  2. College of Business, University of West Florida, 11000 University Parkway, Pensacola, FL, 32514, USA

    June Wei

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Correspondence to June Wei or Yuangao Chen.

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Yao, J., Chen, J., Wei, J. et al. The relationship between soft information in loan titles and online peer-to-peer lending: evidence from RenRenDai platform. Electron Commer Res 19, 111–129 (2019). https://doi.org/10.1007/s10660-018-9293-z

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