Information Systems Research
IEEE Transactions on Knowledge and Data Engineering
Social Networks and the Diffusion of User-Generated Content: Evidence from YouTube
Information Systems Research
Herding behavior in online P2P lending: An empirical investigation
Electronic Commerce Research and Applications
Information and communication technology and the sustainability of microfinance
Electronic Commerce Research and Applications
Electronic Commerce Research and Applications
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We study the online market for peer-to-peer P2P lending, in which individuals bid on unsecured microloans sought by other individual borrowers. Using a large sample of consummated and failed listings from the largest online P2P lending marketplace, Prosper.com, we find that the online friendships of borrowers act as signals of credit quality. Friendships increase the probability of successful funding, lower interest rates on funded loans, and are associated with lower ex post default rates. The economic effects of friendships show a striking gradation based on the roles and identities of the friends. We discuss the implications of our findings for the disintermediation of financial markets and the design of decentralized electronic markets. This paper was accepted by Sandra Slaughter, information systems.