Too long to be true in the description? Evidence from a Peer-to- Peer platform in China

Zhiyong Li , Haiyang Zhang , Mei Yu , Hairan Wang

【 Abstract 】 This paper explores how loan descriptions provided by borrowers in ! uence both the lenders ’ and the platform ’ s behaviour in granting loans and setting interest rates. The empirical results show that textual length serves as a strong signal to identify the borrowers' quality. Strategic signalling theories cannot explain the borrowers' behaviour in China. We further show that the peer-to-peer platform is able to bene " t from taking description length into consideration and that there exists room f or investors to bene " t from this information. 

【 Keywords 】 Peer-to-Peer lending ， Signalling ， Description length 

（张海洋，北京大学数字金融研究中心特约高级研究员，对外经济贸易大学金融学院教授、金融系主任）