Herding Behavior And Its Influences In P2P Lending

P2P lending market is an extension of the private lending market on the Internet.With rapid lending process and low transaction costs,P2 P lending meets micro-financial needs of individual and small-sized enterprises,and provides a new way of investment for lenders at the same time.However,the emergence of investors' herd behavior causes new impacts on both borrowers and lenders.Therefore,to study the herding behavior of lenders on P2 P lending platform has a realistic significance on both sides.Since the first birth of a lending platform in 2005,P2 P lending platforms went through a fast growth.The value also expands unceasingly at the same time,P2 P lending platform is constantly changing.For instance,Prosper Company in the United States is one of the first batch P2 P lending platforms which use marketization interest rate.But now,most of the companies including Prosper adopt the non-market interest rate which means the interest rate will not float over the lenders bids.Quite a part of the existing studies about herding in P2 P lending market were based on the platforms which use marketization interest rate.For non-market interest rate mechanism platforms,these research conclusions are still to be estimated.In order to tell that if the herding behavior in the non-market interest rate platform exists or not,and to tell that if borrower features have effects on the herding,using the records of 4692 bids on renrendai.com as sample,estimate the coefficient using regression test to tell the existence of herd behavior.Use the interactive variables to examine the borrower features' impact on investors' herd behavior.Discusses the influence herd behavior might have on borrower and lender as well as the platform.Results show that the herd behavior under the mechanism of marketization interest rate still exists.There are the influence which borrower features have on both beginning of the bids and the herding but in opposite direction.Herd behavior does not directly affect the benefits and risks of lenders,but may increase the success rate and may reduce the waiting time of the loan,causes the adverse selection problem within the platform and cutthroat competition between the platforms.By studying the herding behavior on the platform of marketization interest rate,we deepen our understanding of the mechanism of P2 P lending market,and test the applicability ofrelated herd behavior model,and provide data for further research,and offer reference to regulators and platform with the industry rules and company regulations.According to the research conclusions,I came up with some suggestions for platform and personal which might promote the development of P2 P lending industry.