P2P外文文献tell me a good story and I may lend money.docx
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P2P外文文献tell me a good story and I may lend money.docx
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P2P外文文献tellmeagoodstoryandImaylendmoney
TellmeagoodstoryandImaylendyoumymoney:
Theroleofnarrativesinpeer-to-peerlendingdecisions
MichalHerzenstein
Assistantprofessorofmarketing
LernerCollegeofBusinessandEconomicsUniversityofDelaware
Newark,DE19716
Tel:
(302)831-1775
Email:
michalh@udel.edu
ScottSonenshein
AssistantprofessorofmanagementJonesGraduateSchoolofBusinessRiceUniversity
6100MainStreet
Houston,TX77005
Tel:
(713)348-3182
Email:
scotts@rice.edu
UtpalM.Dholakia
Professorofmanagement
JonesGraduateSchoolofBusinessRiceUniversity
6100MainStreet
Houston,TX77005
Tel:
(713)348-5376
Email:
dholakia@rice.edu
WethankRickAndrews,RichardSchwarz,andGregHancockfortheirstatisticalassistance.WefurtherthankEditorJohnLynch,theAEandtworeviewersfortheirinsightfulcomments.
FinancialsupportfromtheLernerCollegeofbusinessandeconomicsattheUniversityofDelawareandtheJonesgraduateschoolofbusinessatRiceUniversityisgreatlyappreciated.
Electroniccopyavailableat:
TellmeagoodstoryandImaylendyoumymoney:
Theroleofnarrativesinpeer-to-peerlendingdecisions
Abstract
Weexaminetheroleofidentityclaimsconstructedinnarrativesbyborrowersininfluencinglenderdecisionmakingregardingunsecuredpersonalloans.Westudywhetherthenumberofidentityclaimsandtheircontentinfluencedecisionsoflendersandwhethertheypredictlonger-termperformanceoffundedloans.Usingdatafromthepeer-to-peerlendingwebsiteP,wefindthatunverifiableinformationaffectslendingdecisionsaboveandbeyondobjective,verifiableinformation.Specifically,asthenumberofidentityclaimsinnarrativesincreases,sodoesloanfundingbutloanperformancesuffers,becausetheseborrowersarelesslikelytopayback.Inaddition,identitycontentplaysanimportantrole.Identitiesaboutbeingtrustworthyorsuccessfulareassociatedwithincreasedloanfundingbutironicallytheyarelesspredictiveofloanperformancecomparedwithotheridentities(moralandhardworking).Thus,someidentityclaimsaremeanttomisleadlenderswhileothersaretruerepresentationsofborrowers.
KeyWords
Identities,narratives,peer-to-peerlending,decisionmakingunderuncertainty,consumerfinancialdecisionmaking.
Electroniccopyavailableat:
Thelastdecadehasseenagrowingnumberofbusinessmodelsthatfacilitateeconomicexchangesbetweenindividualswithlimitedinstitutionalmediation.ConsumerscanbuyproductsoneBay,lendmoneyonpeer-to-peer(P2P)loanauctionsitessuchasP,andprovidezero-interest―socialloans‖toentrepreneursviaKiva.org.Inallthesecases,strangersmustdecidewhethertoengageinaneconomicexchangeandonwhattermsusingonlytheprovidedinformation.Objectivequantitativedataaboutexchangepartnersisoftendifficulttoobtain,insufficient,orunreliableinthesecontexts.Asaresult,decisionmakersmayturntosubjective,unverifiable,butpotentiallydiagnosticqualitativedata(Michels2011).
Oneformofqualitativedatausefultodecisionmakersinsucheconomicexchangesisnarrativesconstructedbypotentialexchangepartners.Anarrativeisasequentiallystructureddiscoursethatgivesmeaningtoeventsunfoldingaroundthenarrator(Riessman1993).Forexample,anarrativemightexplainanindividual’spastexperiences,currentsituationorfuturehopes(e.g.,Thompson1996;WongandKing2008).Byprovidinganautobiographicalsketchexplainingthevicissitudesoftheirlife,narrativesoftenprovideawindowintohowindividualsconceptualizethemselves(GergenandGergen1997)andaportraitofhowtheyconstructtheiridentity.Asaresultofeitherambiguityorthestrategicuseofthemediumtoinfluenceothers(e.g.,SchauandGilly2003),onecharacteristicofnarrativesisthattheyofferonlyoneofseveralpossibleinterpretationsofself-relevantevents(Sonenshein2010).Asaresult,narratorscanrelayinterpretationsoftheircircumstancesthatconveyfavorableidentities(Goffman1959).
RESEARCHMOTIVATIONSANDCONTRIBUTIONS
Theideathatnarrativesmayinvolvetheconstructionofafavorableidentityposestwokeyquestionsforresearch.First,whilenarrativescanprovidediagnosticinformationtoadecisionmakerconsideringaneconomicexchange,theveracityofthenarrator’sstoryisdifficultto
determine.Becauseanarrativeoffersthepossibilityofeitherdescribinganauthentic,fullortrueself,orapartial,inauthenticormisleadingself,potentialexchangepartnersarelefttointuitthetruthofwhatispresented.Accordingly,akeyquestiontoconsideris,giventheirpotentialfordiagnosticandmisleadinginformation,towhatextentdonarrativesinfluenceeconomicexchangetransactions?
Whilepreviousconsumerresearchhaslargelyfocusedonnarrativesregardingconsumptionexperiences(Thompson1996)orconsumptionstories(Levy1981),scholarshavenotexaminedtheroleofnarrativesineconomicexchanges.Yet,webelievethatnarrativesmaybeaparticularlypowerfullensastheyallowtheconsumertoattempttobettercontrolanexchangeandthuscanprovideanedgeinhelpingconsummateanexchange.
Asecondkeyquestionistowhatextentdonarrativesaffecttheperformanceandoutcomeofaneconomicexchange?
Narrativescholarsclaimtheconstructionandpresentationofanarrativecanshapeitscreator’sfuturebehavior(Bruner1990)butrarelyempiricallyexaminethenatureofthisinfluence.Suchanexaminationiscriticaltounderstandhowamixtureofquantitativeandqualitativefactorsshapesoutcomequality(e.g.,HoffmanandYates2005).
WeexaminethesetwoquestionsusingonlineP2PloanauctionsonPbystudyingborrower-constructednarratives(particularlytheidentitiesembeddedinthem),thesubsequentdecisionsoflendersandtransactionperformancetwoyearslater.Wedefineidentityclaimsasthewaysthatindividualsdescribethemselvesforothers(Pratt,Rockman,andKaufman2006).
Borrowerscanconstructanidentitybasedonarangeofitems,suchasaboutreligionorsuccess.Thisbecomesanidentityclaimwhenitispublicdiscourseasopposedtoaprivatecognition.Inthisframework,weintendtomakethefollowingcontributions.
First,bydevelopingandtestingtheoryaroundhownarrativessupplementmoreobjectivesourcesofinformationdecisionmakersusewhenconsideringafinancialtransaction,wedraw
attentiontohownarratorscanintentionallyexploituncertaintyandfavorablyshapecircumstantialfactstoobtainresourcessuchasaccesstomoneyinunmediatedenvironments.Thenarrative,asasupplementary,yetsometimesdeal-makingordeal-breaking,informationsourcetodecisionmakers,ispredicatedoncompellingstoriesversusobjectivefacts.Itthusoffersameansforindividualstoreconstructtheirpastsandpresenttheirfuturesinpositiveways.
Second,bylinkingnarrativestoobjectiveperformancemeasures,weshowhownarrativesmaypredictthelonger-termperformanceoflendingdecisions.Becausethedecisionstakesarehighinthisunmediatedandunsecuredfinancialarena,lendersengageinhighlycognitiveprocessing(PettyandWegener1998).Thestrongincentiveofpotentialfinanciallossleadstocognitiveprocessingthattendstoproduceaccurateattributionsaboutapersonandprobabilitiesaboutfutureevents(OsborneandGilbert1992).Giventhismotivationforaccuracy,wesuspectlendersusenarrativestomakeinvestmentdecisions.
Third,fromapracticeperspective,therecentfinancialcrisishasexposedflawsincriteriausedtomakelendingdecisions.Quantitativefinancialmetrics,suchascreditscores,haveprovenunreliableinaccuratelypredictingtheabilityorlikelihoodofconsumerstorepayunsecuredloans(e.g.,Feldman2009).Anarrativeperspectiveontheconsummationandperformanceoffinancialtransactionsoffersthepromiseofimprovingoursystemsofassessingborrowers.
RESEARCHSETTING
OurresearchwasconductedonP(hereafter,Prosper),whichisthelargestP2PloanauctionsiteintheU.S.withoveramillionmembersand$228millioninpersonalloansoriginatedsinceitsinceptioninMarch2006throughApril2011.WeselectedProsperbecauseborrowersandlendersnevermeetinperson,therebyallowingustoassesstheroleofnarrativesinovercominguncertaintythatarisesduringfinancialtransactionsbetweenunacquaintedactors.
TheprocessofborrowingandlendingmoneythroughaloanauctiononProsperisasfollows.Beforepostingtheirloanrequest,borrowersgiveProsperpermissiontoverifyrelevantpersonalinformation(householdincome,homeownership,bankaccounts,etc.)andaccesstotheircreditscorefromExperian,oneofthemajorcredit-reportingagencies.Usingthisandotherinformation,suchaspay-stubsandincometaxreturns,Prosperassignseachborroweracreditgradereflectingtherisktolenders.CreditgradescanrangefromAA,indicatingtheborrowerisextremelylowinrisk(ahighprobabilityofpayingbacktheloan),toA,B,C,D,E,toHR,signifyingthehighestriskofdefault.Borrowerscannowpostloanrequestsforauction.Whenpostingtheirloanauction,borrowerschoosetheamounttoask(upto$25,000)andthehighestinterestratetheywillpay.Theymayalsouseanopen-textareawithunlimitedspacetowriteanythingtheywant—theborrower’snarrative—whichisvoluntary(seealsoMichels2011).
Afterthelistingbecomesactive,lendersdecidewhethertobidand,ifrelevant,howmuchmoneytoofferandatwhatinterestrate.A$1,000loancanbefinancedbyonelenderwholends
$1,000or,a
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