Where You Live Matters : The Impact of Local Financial Market Competition on Banks' Response to Peer-to-Peer Lending
In the past decade, the proliferation of peer-to-peer (P2P) lending has been disrupting the traditional consumer credit market. For prudent policymaking, particularly in judging the ramifications of potential bank mergers and acquisitions (M&As) and informing various traditional bank stakeholders, it is crucial to understand if and how banks are conditioned to respond to the rise of P2P lending. Accordingly, we study whether local market structure drives heterogeneous responses of traditional banks to convert P2P borrowers back to conventional bank loans. We utilize detailed, loan-level data from major P2P lending platforms in the U.S., combined with rich information of local markets, and employ multiple empirical strategies that control for detailed local market characteristics, exploit instrumental variable methods, or explore exogenous shocks to bank lending. We find that ceteris paribus, a borrower, who resides in a more competitive market, is more likely to pay off her P2P loan early by making a large one-time payment than a borrower from a less competitive market. We provide extensive evidence that banks operating in a more competitive market are more incentivized to respond to P2P lending by converting these “FinTech” (financial technologies) borrowers to conventional bank loans. The results suggest that borrowers from different markets do not benefit equally from P2P lending being a disruptor of the traditional consumer credit market. Our study has implications for P2P lending, other FinTech based markets, and the consumer credit market in general
Year of publication: |
2020
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Authors: | Alyakoob, Mohammed |
Other Persons: | Rahman, Mohammad Saifur (contributor) ; Wei, Zaiyan (contributor) |
Publisher: |
[2020]: [S.l.] : SSRN |
Saved in:
freely available
Extent: | 1 Online-Ressource (62 p) |
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Type of publication: | Book / Working Paper |
Language: | English |
Notes: | Nach Informationen von SSRN wurde die ursprüngliche Fassung des Dokuments December 2020 erstellt |
Other identifiers: | 10.2139/ssrn.2985099 [DOI] |
Source: | ECONIS - Online Catalogue of the ZBW |
Persistent link: https://www.econbiz.de/10012854182
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