Institutional investment in online business lending markets

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Cummins, Mark and Mac an Bhaird, Ciarán and Rosati, Pierangleo and Lynn, Theo (2020) Institutional investment in online business lending markets. International Review of Financial Analysis, 71. 101542. ISSN 1057-5219 (https://doi.org/10.1016/j.irfa.2020.101542)

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Abstract

We provide new insights into the business lending decisions of institutional investors in online credit markets by benchmarking their lending performance against that of retail investors.We find superior performance for loans financed by institutional investors, although large sized retail investor groups achieve equivalent performance. Lending decisions of institutional investors are not default risk minimising, and we quantify lending inefficiencies. From a platform perspective, we show that (i) the platform-administered loan allocation process is not biased in favour of institutional investors, (ii) institutional participation in the retail marketplace is not a distorting factor in loan performance, and (iii) the platform's move to a fixed rate system had detrimental effects on loan outcomes for institutional investors. The superior loan performance achieved by institutional investors is confined to the auction period, when institutional investors had autonomy over setting interest rates.

ORCID iDs

Cummins, Mark ORCID logoORCID: https://orcid.org/0000-0002-3539-8843, Mac an Bhaird, Ciarán, Rosati, Pierangleo and Lynn, Theo;
  • Item type:Article
    ID code:82306
    Dates:
    Date
    Event
    31 October 2020
    Published
    15 June 2020
    Published Online
    27 May 2020
    Accepted
    Subjects:Social Sciences > Finance
    Social Sciences > Economic Theory
    Department:UNSPECIFIED
    Depositing user: Pure Administrator
    Date deposited:12 Sep 2022 11:26
    Last modified:11 Nov 2024 13:37
    URI:https://strathprints.strath.ac.uk/id/eprint/82306
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