The Impact of Guarantees on Peer-to-Peer Lending Platform: Evolutionary Game Analysis and Empirical Evidence from China

Abstract

The peer-to-peer lending market has developed rapidly over the past decade and reveals a severe problem of information asymmetry. This research constructed a four-party evolutionary game model to analyze the influence pathway of the guarantee mechanism on the users’ participation of the peer-to-peer lending platform and conducted an empirical study applying the mediating effect model and simultaneous equation model based on data of China’s peer-to-peer lending platform. The theoretical model shows that the guarantee mechanism reduced the participation of borrowers of the peer-to-peer lending platform through a screening effect, but increased the participation of investors through a signal effect. In the case of the platform self-guarantee, there existed a self-screening effect, whose influence on the participation of investors depended on the strength of external constraints imposed on the platform enterprises. Further, the empirical study shows that during the sample period, the platform self-guarantee mechanism reduced the scale of borrowers and investors of the peer-to-peer lending platform at the same time, thus reducing the transaction volume of the platform. Although the third-party guarantee mechanism reduced the scale of borrowers, it increased the scale of investors, and the comprehensive effect was to increase the transaction volume of the platform. On this basis, this research puts forward suggestions such as strengthening the qualification examination of the platform enterprises, transforming the platform self-guarantee mechanism into the third-party guarantee mechanism, and introducing more signal mechanisms.

Breakthrough Path of Low-Level Equilibrium of China's Policy-Oriented Financing Guarantee Market

“…For instance, Wang et al ( 2016 ) used the stability principle of differential equations to analyze the adjustable range of operation mechanisms such as risk sharing ratio and government risk subsidy when the guaranteed market reached an equilibrium state. Weng and Luo ( 2021 ) and Xu and Liu ( 2021 ) constructed multi-agents evolutionary game models of bank credit market and P2P lending market, respectively, to verify the positive effect of guaranteed mechanism on the improvement of market equilibrium level. Moreover, evolutionary game theory is also used to solve problems in other fields, such as green building construction incentive (Meng et al, 2021 ) and pandemic prevention (Zhuang et al, 2021 ).…”

Evolutionary game analysis of FinTech transformation: A social co-governance pattern of peer-to-peer lending market in China

“…An evolutionary game model of different regulatory stages was established to analyze the optimal state of the P2P lending market structure under the strengthening supervision and shrinking industry (Peng et al, 2020 ). Evolutionary game models were also developed in several lines of research to help understand the risk supervision of P2P lending platforms (Gu et al, 2018 ), to investigate the influence pathway of the guarantee mechanism on users' participation (Weng and Luo, 2021 ), and to analyze the risk preference behavior of lenders and the credit choice of borrowers (Liu and Xia, 2017 ).…”

“…Digital technology, such as big data, block chain, and cloud computing, is quickly evolving in the third technological revolution (Li G. et al, 2022 ). The game-changing technological innovations have been triggered and introduced into Financial Technology (FinTech), transforming the way the financial industry operates and fulfilling customers' needs (Agarwal and Zhang, 2020 ; Brandl and Hornuf, 2020 ; Chen and Sivakumar, 2021 ; Weng and Luo, 2021 ; Lei et al, 2022 ). Taking its place as one of the most significant segments in the broad area of FinTech (Luther, 2019 ), peer-to-peer (P2P) lending has emerged as an infomediary platform that links up investors and borrowers to form debt–credit relationships via the Internet (Lee and Lee, 2012 ; Lin et al, 2013 ; An et al, 2022 ).…”

Evolutionary Game Analysis of Farmers’ Conservation Tillage Behavior in Black Soil Areas Guided by Deep Learning

“…If the convolution kernel of the first layer of convolution is too large, some details of the image will be lost. If the convolution kernel is too small, the features of the image cannot be presented [ 22 , 23 ]. Traditional CNNs use fixed-size convolution kernels, and thus image granularity is also fixed.…”