Geographical-Proximity Bias in P2B Crowdlending Strategies
Gresse, Carole; Marin, Hugo (2021), Geographical-Proximity Bias in P2B Crowdlending Strategies, Séminaire du groupe de recherche en finance de l'Université Jean Moulin Lyon 3, 2021-06, Lyon, FRANCE
TypeCommunication / Conférence
Conference titleSéminaire du groupe de recherche en finance de l'Université Jean Moulin Lyon 3
MetadataShow full item record
Abstract (EN)Using data from a peer-to-business crowdlending platform that exploits an auction-driven system to fund corporate loans, we show that non-professional investors are subject to a geographical-proximity bias. They are more likely to win the auctions of borrowers located close to their place of residence notwithstanding that they are not better informed about their creditworthiness. Unexpectedly, this behavioral bias distorts the loan rate discovery processby increasing the cost of funding for borrowers. This adverse effect results from the greaterability of local investors to submit winning bids at an early stage. This ability is gained from their experience in previous auctions of geographically close borrowers. This suggests that the familiarity feeling stemming from geographical closeness strengthens investor attention,and thereby improves lenders’ knowledge about the dynamics of the order flow in local borrowers’ auctions.
Subjects / Keywordspeer-to-business crowdlending; crowdfunding; behavioral finance; loan performance; price discovery process; G11,G14,G23,658.1/Gestion financière, capital risque, création de valeur
Showing items related by title and author.