Inaccurate Borrower Information and Credit Risk: Evidence from Marketplace Loans
Year: 2024
Type: article
Abstract: Inaccurate borrower-provided information in marketplace loans is informative about credit risk. An inaccuracy index constructed from the consistency of loan amount with outstanding credit balance, roundness of reported income, and roundness of chosen loan amount predicts the likelihood of default, and the additional default risk is not compensated by higher interest. Inaccurate information is more prevalent in areas with lower social capital and weaker social norms. It is also lower among borrowers whose professions are considered less honest, and among borrowers with higher income uncertainty. These results suggest that inaccuracy is driven by both deliberate misreporting and genuine uncertainty. (JEL D12, D91, G23, G41)
DOI: 10.1093/rcfs/cfae025
Author: Vesa Pursiainen
Institutions: University of St.Gallen, Swiss Finance Institute
Language: English
Subfield: Management Information Systems
Domain: Social Sciences
Open Access status: hybrid
Estimated APC paid: $4,229
OpenAlex ID: W4403277289