- About Us
- Degrees and Majors
- Departments, Centers, and Labs
- Overview
- Departments and Programs
- Centers and Offices
- Center for Leadership Ethics
- Center for the Management of Information
- Center for Management Innovations in Health Care
- Economic and Business Research Center
- Information Assurance and Security Education Center
- INSITE: Center for Business Intelligence and Analytics
- McGuire Center for Entrepreneurship
- National Center for Border Security and Immigration
- Office of Economic Education
- Labs
- Eller Executive Education
- Faculty and Research
- Invest in Eller
- News, Events, and Multimedia
- Contact Us
Research Buzz
Judging Borrowers by the Company They Keep
Friendship Networks and Information Asymmetry in Online Peer-to-Peer Lending
The authors study the online market for peer-to-peer (P2P) lending, in which individuals bid on unsecured microloans sought by other individual borrowers.
Using a large sample of consummated and failed listings from the largest online P2P lending marketplace — Prosper.com — they found that the online friendships of borrowers act as signals of credit quality. Friendships increase the probability of successful funding, lower interest rates on funded loans, and are associated with lower ex-post default rates.
The economic effects of friendships show a striking gradation based on the roles and identities of the friends. They discuss the implications of the findings for the disintermediation of financial markets and the design of decentralized electronic markets.
Authors
Mingfeng Lin is an assistant professor of MIS, Eller College of Management, University of Arizona. Nagpurnanand R. Prabhala and Siva Viswanathan are both of the Robert H. Smith School of Business, University of Maryland, College Park.
Publication Source
Forthcoming in Management Science.
Return to Research Buzz, or for assistance with incorporating Eller College research into your media, please contact us.
