Cultural diversity and borrowers’ behavior: evidence from peer-to-peer lending
Chen, Zhongfei; Jin, Ming; Andrikopoulos, Athanasios; Li, Youwei
Dr Thanos Andrikopoulos A.Andrikopoulos@hull.ac.uk
Senior Lecturer (Associate Professor) in Finance
Professor Youwei Li Youwei.Li@hull.ac.uk
Professor of Finance
We study cultural diversity and borrowers’ behavior using data from peer-to-peer lending platform Renrendai. We proxy cultural diversity with the Linguistic Diversity Index, measured by the population-weighted number of dialects spoken in a region, and we show that it has a negative (positive) effect on the loan amount (default rate) of the borrowers. We address endogeneity using two novel instruments, the river length and land slope of Chinese cities, a Heckman two-stage model, and an IV-Heckit model. We also study areas where financial institutions’ loan balances are higher (lower) than average. In areas with low (high) loan balances, the amount borrowed (the default rate) is affected more (less). We argue that lenders’ behavior is a reason that borrowers in diverse cultures apply for smaller loans. Our results pass a number of robustness tests. Finally, we offer suggestions for improving risk management and inclusive financial development.
Chen, Z., Jin, M., Andrikopoulos, A., & Li, Y. (in press). Cultural diversity and borrowers’ behavior: evidence from peer-to-peer lending. The European journal of finance, 1-25. https://doi.org/10.1080/1351847X.2021.2007496
|Journal Article Type||Article|
|Acceptance Date||Nov 5, 2021|
|Online Publication Date||Dec 3, 2021|
|Deposit Date||Dec 3, 2021|
|Publicly Available Date||Jun 4, 2023|
|Journal||European Journal of Finance|
|Peer Reviewed||Peer Reviewed|
|Keywords||Culture; Cultural diversity; dialect diversity; peer-to-peer lending|
This file is under embargo until Jun 4, 2023 due to copyright reasons.
Contact A.Andrikopoulos@hull.ac.uk to request a copy for personal use.
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