Behavioural aspects of China's P2P lending

In this paper, we argue that China's P2P lending is influenced by the behavioural factors of platforms. This because severe information asymmetry results in high uncertainty surrounding industry. Specifically, examine three aspects lending: sentiments, herding, and speculation. Using a sample 918 platforms from October 2015-September 2019, document positive news release media (sentiments) encourages lending; herd on their peers making decisions; contains speculative elements driven real estate bubbles. Moreover, find these effects are less profound if adopt fund custody mechanism which commercial banks provide custodian services for investor funds used lending. result suggests more important explaining when severe. We obtain controlling other usual can explain lending, including characteristics platforms, macroeconomic variables, variables reflecting features operating environment. Our suggest regulators should monitor risk management reduce asymmetric faced participants market.