The Information Value of Online Social Networks : Lessons from Peer-to-Peer Lending

Seth Freedman, Ginger Zhe Jin

We examine whether social networks facilitate online markets using data from a leading peer-to-peer lending website. We find that borrowers with social ties are consistently more likely to have their loans funded and receive lower interest rates; however, most borrowers with social ties are more likely to pay late or default. We provide evidence that these findings are driven by lenders not fully understanding the relationship between social ties and unobserved borrower quality. Overall, our findings suggest caution for using online social networks as a signal of quality in anonymous transactions

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Year of publication:	January 2014
Authors:	Freedman, Seth
Other Persons:	Jin, Ginger Zhe (contributor)
Institutions:	National Bureau of Economic Research (contributor)
Publisher:	Cambridge, Mass : National Bureau of Economic Research
Subject:	Social Web \| Social web \| Informeller Finanzsektor \| Informal finance \| Informationswert \| Information value \| Kreditwürdigkeit \| Credit rating \| Kreditmarkt \| Credit market \| Soziales Netzwerk \| Social network

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