Behavioural aspects of China's P2P lending
研究中国P2P借贷中的三种行为因素：借贷情绪、羊群效应和投机行为，发现这些行为在信息不对称严重时更显著，而银行资金托管机制能减弱其影响。
In this paper, we argue that China's P2P lending is influenced by the behavioural factors of P2P platforms. This is because severe information asymmetry results in high uncertainty surrounding China's P2P lending industry. Specifically, we examine three behavioural aspects of P2P lending: lending sentiments, herding, and speculation. Using a sample of 918 P2P platforms from October 2015-September 2019, we document that positive P2P news release in the media (sentiments) encourages P2P lending; P2P platforms herd on their peers in making lending decisions; and P2P lending contains speculative elements and is driven by real estate bubbles. Moreover, we find that these behavioural effects are less profound if P2P platforms adopt a fund custody mechanism in which commercial banks provide custodian services for investor funds used for P2P lending. This result suggests that behavioural factors are more important in explaining P2P lending when information asymmetry is more severe. We obtain these results by controlling for other usual factors that can explain P2P lending, including characteristics of P2P platforms, macroeconomic variables, and other variables reflecting features of P2P operating environment. Our results suggest that regulators should monitor risk management of P2P platforms and reduce asymmetric information faced by participants in China's P2P lending market.