Abstract
The rise of crowdlending enables small firms to borrow capital where transaction costs are reduced and financial accessibility is improved. Crowdlending platforms require lenders to depend solely on the information provided by its borrowers. Such information reliance could impact lenders’ financial behavior and investment decision and return. In this study, we develop a model to understand what elements and factors influence the formation of trust in crowdlending. Our results suggest that lenders are likely to pay more attention to platform quality and risk mitigation strategy than attractive loan cues. Our findings can aid the crowdlending industry in growing its investor base and increasing potential customers’ access to capital. These findings could also assist in developing regulatory guidelines in the crowdlending market.
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Data availability
The data that support the findings of this study are available on request from the first author. The data are not publicly available due to information that could compromise the privacy of research participants.
Notes
However, this study took a snapshot of year 2016 where there is no extreme event, e.g., economic downturn or financial crisis which may impact performance of crowdlending and banks.
It is important to note that loan decision with high weightage given to borrower’s characteristics can lead to discrimination against certain group of borrowers.
“According to the calculative-based trust paradigm, trust can be shaped by rational assessments of the costs and benefits of another party cheating or cooperating in the relationship” (Gefen 2003)
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Perdana, A., Jutasompakorn, P. & Chung, S. Shaping crowdlending investors’ trust: Technological, social, and economic exchange perspectives. Electron Markets 33, 25 (2023). https://doi.org/10.1007/s12525-023-00650-7
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DOI: https://doi.org/10.1007/s12525-023-00650-7