Essays on peer-to-peer lending

Arga, Desak Nyoman Filiadewi

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https://hdl.handle.net/2142/109614 Copy

Description

Title

Essays on peer-to-peer lending

Author(s)

Arga, Desak Nyoman Filiadewi

Issue Date

2020-12-04

Director of Research (if dissertation) or Advisor (if thesis)

Bernhardt, Dan M

Doctoral Committee Chair(s)

Bernhardt, Dan M

Committee Member(s)

• Krasa, Stefan
• Hong, Seung-Hyun
• Lemus, Jorge

Department of Study

Economics

Discipline

Economics

Degree Granting Institution

University of Illinois at Urbana-Champaign

Degree Name

Ph.D.

Degree Level

Dissertation

Keyword(s)

• Peer-to-peer
• lending

Abstract

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.

Graduation Semester

2020-12

Type of Resource

Thesis

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

Copyright and License Information

Copyright 2020 Desak Nyoman Filiadewi Arga

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