Essays on peer-to-peer lending

This dissertation consists of three chapters on the peer-to-peer (P2P) lending market. All three chapters are based on data from the same U.S.-based P2P lending online platform, LendingClub. In Chapter 1, I study the funding rate of loans in the primary market. I use a large dataset of LendingClub's daily primary market listing combined with its monthly loan progress data to determine what factors affect funding rate to vary across loans and across time. I find that variation in the funding rate within a loan can be explained by its availability. As a loan gets closer to be fully funded, investments are coming at a higher rate for this loan. I also find that a borrower's creditworthiness is significant in explaining the varying funding rates across loans. In Chapter 2, I explore the secondary market of LendingClub using the sellers' perspective. The secondary market is a platform where lenders can buy and sell notes originated from loans issued in LendingClub's primary market. A note is a partial investment of a loan. I use a large dataset of daily secondary market note listing to examine which loans are more likely to have notes listed in the secondary market. I find that notes of grade A and of grade D, which are the least risky and the riskiest assessed grades, are more likely to be listed in the secondary market than loans of grade B or grade C. Lenders are also more likely to list their note in the secondary market at a negative markup when it has a late payment history. I find that the sellers' behavior are consistent with my findings on the buyers' behavior in Chapter 3. In this last chapter, I explore the secondary market of LendingClub using the buyers' perspective. Using the secondary market data listing, I explore the factors that affect a buyer's probability in purchasing a note from the secondary market. I find that across all periods of listing, grade-B and grade-C notes are always less preferred than either a grade-A note or a grade-D note. As the period increases, the preference for grade-A notes goes down while it goes up for grade-D notes. I provide a simple theoretical framework to explain the buyers' belief-updating process before deciding whether to purchase a note or not in the secondary market.

Name thesis:degree_name

Ph.D.

Level thesis:degree_level

Dissertation

Discipline thesis:degree_discipline

Economics

Grantor

University of Illinois at Urbana-Champaign

Year dc:date

2021

Author dc:creator

• Arga, Desak Nyoman Filiadewi

Contributors dc:contributor

• Bernhardt, Dan M
• Krasa, Stefan
• Hong, Seung-Hyun
• Lemus, Jorge

• Peer-to-peer
• lending

Statement dc:rights

• Copyright 2020 Desak Nyoman Filiadewi Arga

Language dc:language

en

Handle dc:identifier

http://hdl.handle.net/2142/109614

OAI identifier oai:identifier

oai:www.ideals.illinois.edu:2142/109614