Working Paper: CEPR ID: DP14740
Authors: Fabio Braggion; Alberto Manconi; Nicola Pavanini; Haikun Zhu
Abstract: Whereas many online marketplaces are fundamentally peer-to-peer, credit ones sell diversified loan portfolios characterized by maturity mismatch, a traditional feature of financial intermediation. To understand why, we develop a structural model of online debt crowdfunding and estimate it on a novel database from a large Chinese platform. Abandoning the peer-to-peer paradigm raises lender surplus, platform profits, and credit provision, but exposes investors to liquidity risk. A counterfactual where the platform resembles a bank by bearing liquidity risk generates larger lender surplus and credit provision when liquidity is low. More generally, our results shed light on how financial intermediation creates value.
Keywords: marketplace; credit; chinese financial system; structural estimation
JEL Codes: D14; D61; G21; G51; L21
Edges that are evidenced by causal inference methods are in orange, and the rest are in light blue.
| Cause | Effect |
|---|---|
| abandoning the peer-to-peer paradigm (D26) | increased lender surplus (G21) |
| abandoning the peer-to-peer paradigm (D26) | platform profits (D33) |
| abandoning the peer-to-peer paradigm (D26) | exposing investors to liquidity risk (G24) |
| bank-like model (G21) | larger lender surplus (G21) |
| bank-like model (G21) | increased credit provision (E51) |
| high liquidity risk and risk-averse investors (G19) | bank-like products improve welfare (G21) |
| liquidity risk (G33) | lender behavior (G21) |
| maturity mismatch (F32) | broader assortment of portfolios (G11) |
| marketplace credit model (D16) | welfare improvement compared to peer-to-peer model (D69) |