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Conference of 2007
Finance Center Münster
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We analyze the role of intermediaries on electronic markets using detailed data of more than 14,000 originated loans on an electronic P2P (person-to-person) lending platform. On such an electronic credit market lenders bid for supplying a private loan. Screening of potential borrowers and the monitoring of loan repayment can be delegated to designated group leaders. We find that these market participants act as financial intermediaries and significantly improve borrowers’ credit conditions. As suggested by traditional intermediation theory (e.g. Diamond 1984; Leland and Pyle 1976), the intermediary creates value by reducing information asymmetries between borrowers and lenders. Our findings are robust to self-selection and characteristics of the financial transactions, and may be surprising given the long discussion on disintermediation due to electronic marketplaces.
Abstract
Emergence of Financial Intermediaries on Electronic Markets: The Case of Online P2P Lending
Gleisner, Fabian; Berger, SvenWe analyze the role of intermediaries on electronic markets using detailed data of more than 14,000 originated loans on an electronic P2P (person-to-person) lending platform. On such an electronic credit market lenders bid for supplying a private loan. Screening of potential borrowers and the monitoring of loan repayment can be delegated to designated group leaders. We find that these market participants act as financial intermediaries and significantly improve borrowers’ credit conditions. As suggested by traditional intermediation theory (e.g. Diamond 1984; Leland and Pyle 1976), the intermediary creates value by reducing information asymmetries between borrowers and lenders. Our findings are robust to self-selection and characteristics of the financial transactions, and may be surprising given the long discussion on disintermediation due to electronic marketplaces.