Risk Management Behavior Of Investors In Online Lending Market

Peer-to-peer online lending is a new type of financial industry based on information technology under the background of the integration of finance and technology.In the online lending market,investors and borrowers bypass the financial intermediary to trade directly,which helps to reduce the financial transaction cost and financial service threshold,and meet the diversified investment and financing needs.But,there is information asymmetry between online lending investors and platforms,investors and borrowers,platforms and borrowers.If there is no effective signal transmission mechanism,scientific risk management methods and timely external regulatory policies,the online lending market will produce serious adverse selection and moral hazard problems,which will lead to low market efficiency and risk outbreak.Whether the online lending investors have the ability of risk identification and risk dispersion awareness,and whether they can dynamically adjust their risk management behavior through self-learning,will directly affect the operation efficiency and risk transmission of the online lending market.In recent years,China’s online lending industry risk events continue to break out,which seriously affected financial stability and the property safety of online lending investors.At present,the actual operation of peer-to-peer online lending institutions in China has dropped from more than 5000 in the peak period to zero.At the turning point of the online lending industry,this paper analyzes the risks of China’s online lending market from the perspective of investors.On the one hand,it helps to clarify the role of investors in the operation of the online lending market and the risk transmission process,improve the relevant research on the risk of online lending,and provide reference for the future development and supervision of Fintech in China;on the other hand,it enriches the research of investor behavior in the fields of information economics and behavioral finance,and expands the research ideas for the research of investor behavior in the era of Fintech.In view of this,this paper studies the risk management behavior characteristics of investors in risk identification,risk dispersion and other aspects under the condition of asymmetric information.This paper theoretically analyzes the potential risk points and risk transmission path of peer-to-peer online lending market.And it is found that the risk behavior of platforms and borrowers under the condition of asymmetric information is the main risk sources of peer-to-peer online lending market,but the risk identification ability and risk management behavior characteristics of investors can play an important role in increasing or mitigating market risk.Then,this paper analyzes the risk management behavior characteristics of online lending investors from the following.Firstly,we use the signal transmission model to study the risk identification behavior of investors.Secondly,we use the portfolio theory to study the risk diversification behavior of investors in the stage of portfolio construction.Thirdly,based on the investor learning theory,we study impact of different learning types on investor risk management.In order to study the risk identification behavior of online lending investors,this paper selects the borrower credit rating given by the platform as the default risk signal of the borrower,and constructs the credit rating signal transmission model.Furthermore,on the basis of the theoretical model,we empirically test the effectiveness of credit rating signals,the extent and mechanism of credit rating signals on individual investors’ investment decisions.The empirical results are as follows.Credit rating given by the online lending platform is an effective signal to reflect the credit risk of the borrower.The default probability of borrowers is negatively correlated with credit rating.Therefore,rational investors should refer to the credit rating to identify the credit risk of borrowers and make investment decisions.The following empirical evidence confirms that online lending investors do use the credit rating as a signaling mechanism to identify credit risks when choosing the subject of borrowing and determining the amount of investment.Specifically,the higher the credit rating of the borrower,the more the number of investors,the higher the amount of investment in the bid,and the shorter the time required for the bid to reach the full standard.At the same time,the characteristics of borrowers such as education,gender,income,and external macro monetary policy will affect the impact of credit rating on investors’ investment decisions.In terms of risk dispersion of online lending investors,this paper constructs a theoretical model of online lending investors’ portfolio,and solves the optimal weight of investors’ investment portfolio.Then,to analyze whether investors have the consciousness of diversification and the investors’ decision logic of setting weight,this paper constructs an empirical model to test the influencing factors of the weight assigned to each loan subject by investors.This paper finds that,mature online lending investors will adopt the diversification investment strategy.And the weight set by the investor is small and significantly positively correlated with the interest rate,and negatively correlated with the risk variables such as the loan term and the loan amount.These empirical results show that investors not only consider the interest rate,but also consider the default risk of borrowers reflected by other public information.In addition,there are differences in investors’ risk management behavior through decentralization.Compared with other types of investors,investors with rich investment experience,investors investing credit certification and investors using complex diversification prefer to invest objects with high interest rate and set larger weight.In the online lending market,individual investors can make repeated investments and carry out the two-way transaction of loan and investment.Taking advantage of the characteristics of online lending market,this paper innovatively studies the impact of investment practice and role transition on investors’ risk identification,risk preference and investment performance.This paper involves not only the influence of investor learning on the risk identification of a single bid,but also the effect of investor learning on the construction of investment portfolio.Through the empirical analysis of the borrowing bids,we have come to some interesting conclusions.Firstly,investment experience has a stronger role in improving investment performance than borrowing experience.There is a significant negative correlation between the number of historical investment,the number of historical investment failures and the default probability of the borrowing bid.But,the borrowing experience and historical investment time have no such effect.Secondly,borrowing experience can reduce the amount of investment set by investors and the reference degree to the credit rating of borrowers given by the platform.Investment experience can also reduce the investment amount of investors,but the historical investment failure experience can improve the reference degree of investors to the credit rating of borrowers.Through the empirical analysis of investment portfolio,we find that borrowing experience and historical investment failure experience will reduce the probability and investment proportion of high-risk loans in the portfolio.Based on the theoretical analysis of the impact of investors on the risk transmission of peer-to-peer online lending market,this paper further empirically tests the risk identification behavior,risk dispersion behavior and investor learning behavior of investors.We find that investors do not blindly pursue high returns and have certain risk management capabilities under the condition of asymmetric information.Investors can identify the credit risk of borrowers with the help of credit rating signals and take investment diversification strategy to reduce portfolio risk.And with the accumulation of borrowing experience and investment experience,investors will continue to learn and adjust the risk identification strategy and risk preference.On the one hand,this paper provides a new perspective and research findings for the risk transmission of China’s peer-to-peer online lending market under the condition of asymmetric information.On the other hand,it has theoretical and practical significance for the topics of investor behavior and supervision of new financial formats in the era of Fintech.