Ge et al. (2017) examines the predictive power of self-disclosed social media information on borrowers’ default in P2P lending and identifies social deterrence as a new underlying mechanism that explains the predictive power. The authors combine data from Renrendai.com with social media presence data from Weibo.com. The main finding is that borrowers’ self-disclosure of their social media account and their social media activities are shown to predict borrowers’ default probability. Leveraging a social media marketing campaign that increases the credibility of the P2P platform and lenders disclosing loan default information on borrowers’ social media accounts as a natural experiment, a difference-in-differences analysis finds a significant decrease in loan default rate and increase in default repayment probability after the event, indicating that borrowers are deterred by potential social stigma. The results suggest that borrowers’ social information can be used not only for credit screening but also for default reduction and debt collection.
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