Social Influence and Defaults in Peer-to-Peer Lending Networks

Presenter Information

Yong Lu, Information Sciences and Technologies, Penn State University, University Park, PA, United States.Follow
Bin Gu, Information, Risk and Operations Management, University of Texas at Austin, Austin, TX, United States.Follow
Qiang Ye, Harbin Institute of Technology, Harbin, China.Follow
Zhexiang Sheng, University of Illinois at Urbana-Champaign, Champaign, IL, United States.Follow

Start Date

14-12-2012 12:00 AM

Description

We assess social influence on borrowers’ default decisions in a peer-to-peer lending market. Our analysis suggests that online borrowers are significantly influenced by defaults in their social networks. A friend’s default decision more than doubles a user’s default rate. We also find that not all friends have equal influences. The social influence is highly significant among online friends made through the peer-to-peer lending site. Social influence is much weaker in magnitude among offline friendships that were carried over to the peer-to-peer lending site.

Recommended Citation

Lu, Yong; Gu, Bin; Ye, Qiang; and Sheng, Zhexiang, "Social Influence and Defaults in Peer-to-Peer Lending Networks" (2012). ICIS 2012 Proceedings. 19.
https://aisel.aisnet.org/icis2012/proceedings/DigitalNetworks/19