Safety promise, moral hazard and financial supervision: Evidence from peer-to-peer lending

This paper examines the influence of safety promise on loan funding and default risk, using peer-to-peer data. Under the platform guarantee mechanism, we find the function of credit rating to screen borrower is distorted. The lack of information disclosure is an important reason for the degradation of credit rating quality and moral hazard. For regulators, we propose a new statistical indicator (default-deviation) to measure the strength of information disclosure.

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