ABSTRACT We examine the role of local cultural norms in marketplace lending. Using data from one of China's largest marketplace lending platforms (Renrendai), we find that borrowers from regions with a stronger Confucian influence are more likely to secure funding and receive a higher funded proportion of their loans. Our findings are more pronounced in deals where borrowers’ information is limited as well as in regions characterized by less social capital, weaker contract enforceability, and lesser effects from the Cultural Revolution. Moreover, borrowers in regions with a stronger Confucian culture are more likely to repay their loans on time, and their lenders enjoy higher returns. Our findings highlight the unique role of cultural norms in mitigating information asymmetry in marketplace lending.
Li et al. (Thu,) studied this question.