The Mechanism And Effectiveness Of Credit Scoring Of P2P Lending Platform

As an information intermediary that helping individuals or middle and small-sized enterprises(SMEs)to match fund demand with fund supply,P2 P platform can matching efficiency by reducing asymmetric information between borrowers and lenders.With the fact that most of the attributes of a P2 P listing is voluntarily disclosed by borrowers themselves and the information related to these attributes is highly heterogeneous,the comprehensive evaluation on borrowers' credit risk has very valuable information value.However,different from foreign P2 P platforms who can directly obtain the comprehensive credit scores of individuals from third-parties,the information about the comprehensive evaluation on borrowers' credit risk is disclosed by the platforms in China,and hence the effect of the disclosure of information about the evaluation on borrowers' credit risk on default probability can used to examine the intermediary roles of P2 P platforms.Based on the introduction of research background and literature review,this dissertation selects 7,480 successful and unsecured P2 P listings on RENRENDAI platform during 2010-2015 to investigate the components of borrowers' credit cores provided by the platform,to examine the explanatory power of credit core for the repayment performance of successful loans,and to investigate the roles of credit evaluation mechanism in revealing borrowers' credit risk by utilizing an exogenous incident that borrowers swarm into the platform.The information sources for the platform to evaluate borrowers' worthiness mainly include the public information on the listing page and the extra information privately owned but not disclosed by platform.The public information includes personal features,asset conditions,credit record and certification status of original information.Our empirical results show that,firstly,the certification information that has been checked and verified by the platform has the strongest explanatory power for borrowers' credit score,which is more pronounced for high-quality borrowers.Secondly,compared to the public information on listing page,the extra information has stronger explanatory power for the repayment performance of loans,which is more pronounced for low-quality borrowers.Utilizing an exogenous event that a large number of borrowers swarmed into platform in April 2014,further evidence shows that not only the credit evaluation on borrowers becomes stricter,but also the platform begins to use more and more extra information after the event.We find that the explanatory power of public information for credit score as well as repayment performance is reducing,while the explanatory power of extra information is increasing after the event.And this finding is more pronounced for low-quality borrowers.