Bridging the credit gap: The influence of regional bank structure on the expansion of peer-to-peer lending

Funding Sponsor

Beihang University

Author's Department

Management Department

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https://doi.org/10.1016/j.bar.2024.101448

All Authors

Nourhan Eid, Junhong Yang, Meryem Duygun

Document Type

Research Article

Publication Title

British Accounting Review

Publication Date

11-1-2024

doi

10.1016/j.bar.2024.101448

Abstract

This paper investigates the extent to which the regional credit market structures, characterized by the presence and lending capacity of traditional banks, shape the growth of online lending marketplaces using peer-to-peer (P2P) lending data. Using an instrumental variables (IV) approach, our study suggests that areas underserved by traditional banks witness more significant growth in P2P lending. This impact is more pronounced in regions with a lower presence of small bank outreach. Furthermore, we find that an increase in P2P lending is associated with a reduced risk of borrower default. Our findings also show that the expansion of online lending marketplaces positively impacts borrowers’ financial well-being by improving their credit scores.

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