Study On The Herd Behavior Of P2P Network Lending Platform

Online Peer-to-Peer(P2P)lending platforms originate from the microfinance model.In recent years,the P2 P lending model has been paid much attention and wildly used as the rapid development of internet technology promotes the global P2 P lending market.P2 P appears in public in a new way of private lending,and it combines with the operating characteristics of microfinance model.Under the effect of P2 P mechanism,both debtors and creditors can benefit from each other,and the P2 P platform can also get a rapid development.For example,one party can get efficient financing for businesses,while the other party can gain profit from self-lending.However,online P2 P lending is still new in China.It develops rapidly but still faces many challenges.Due to many information asymmetries on the internet,the sustained growth of P2 P lending platforms has been reversed since the second half of 2013,and the wave of failures of these platforms lasted until 2014.This phenomenon has aroused the attention of national government and scholars.Most research shows that there is severe information asymmetry in the Internet-based P2 P lending platforms although online P2 P lending can facilitate both debtors and creditors.Meanwhile,lenders could find it difficult to distinguish from a large amount of loan information and make smart financial choices,especially under imperfect laws and regulations.Thus,previous investment decisions will be used as a reference.In terms of P2 P lending projects,those bidding projects that once involved many lenders will attract more prospective lenders,and this will be characterized by herd behavior.The questions about whether herd behavior exist in P2 P lending platform in such an investment environment and how risk degree affects herd behavior and how herd behavior affects online P2 P lending markets need to be studied further.Based on this,this paper reviews overseas and domestic research,and focuses on the herd behavior of online P2 P lending platforms.Based on reality analysis,this paper examines the causes of herd behavior in online P2 P lending platforms from three aspects-information asymmetry mechanism and crowd psychology and platform mechanism.In addition,the future bidding possibilities deduced from relevant borrowing data in RenRendai can be used as a measurement index to evaluate herd behavior.By building Logistic regression model,this paper investigates the effect of the current number of bids on future bidding possibilities and identifies herd behavior.In order to further explore the impact of degree of risk on herd behavior,this paper assumes that the bidding projects with a low credit rate indicate a high degree of risk.This assumption can be tested through the grouping comparison analysis,and credit ratings can be used as a measurement index to evaluate the degree of risk.The results show that firstly herd behavior does indeed exist in China's online P2 P lending platform.This means that the more current number of bids,the more future bidding possibilities.Secondly,the degree of risk is significantly positively related to herd behavior.This means that the higher the degree of risk,the more herd behavior should be observed.By following research results,this paper will make suggestions to protect both debtors and creditors,as well as the markets,against herd behavior and to ensure the sound development of online P2 P lending platforms.At the government level,the relevant departments should take actions to tackle the asymmetric information problems,to improve credit rating systems,and to enhance supervision.For online P2 P platforms,information disclosure systems need to be improved,and the received funds should be supervised by the third party.For borrowers,it is necessary to provide real information and require a careful selection of financing platforms.In addition,lenders need to learn financial skills to promote their investment consciousness.