Predicting and Deterring Default with Social Media Information in Peer-to-Peer Lending

Ruyi Ge, Juan Feng, Bin Gu, Pengzhu Zhang

Research output: Contribution to journalArticle

21 Scopus citations

Abstract

This study examines the predictive power of self-disclosed social media information on borrowers’ default in peer-to-peer (P2P) lending and identifies social deterrence as a new underlying mechanism that explains the predictive power. Using a unique data set that combines loan data from a large P2P lending platform with social media presence data from a popular social media site, borrowers’ self-disclosure of their social media account and their social media activities are shown to predict borrowers’ default probability. Leveraging a social media marketing campaign that increases the credibility of the P2P platform and lenders disclosing loan default information on borrowers’ social media accounts as a natural experiment, a difference-in-differences analysis finds a significant decrease in loan default rate and increase in default repayment probability after the event, indicating that borrowers are deterred by potential social stigma. The results suggest that borrowers’ social information can be used not only for credit screening but also for default reduction and debt collection.

Original languageEnglish (US)
Pages (from-to)401-424
Number of pages24
JournalJournal of Management Information Systems
Volume34
Issue number2
DOIs
Publication statusPublished - Apr 3 2017

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ASJC Scopus subject areas

  • Management Information Systems
  • Computer Science Applications
  • Management Science and Operations Research
  • Information Systems and Management

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