Tell Me a Good Story and I May Lend you Money: The Role of Narratives in Peer-to-Peer Lending Decisions

This research examines how identity claims constructed in narratives by borrowers influence lender decisions about unsecured personal loans. Specifically, do the number of identity claims and their content influence lending decisions, and can they predict the longer-term performance of funded loans? Using data from the peer-to-peer lending website Prosper.com, the authors find that unverifiable information affects lending decisions above and beyond the influence of objective, verifiable information. As the number of identity claims in narratives increases, so does loan funding, whereas loan performance suffers, because these borrowers are less likely to pay back the loan. In addition, identity content plays an important role. Identities focused on being trustworthy or successful are associated with increased loan funding but ironically are less predictive of loan performance than other identities (i.e., moral and economic hardship). Thus, some identity claims aim to mislead lenders, whereas others provide true representations of borrowers.

[1]  Jeremy Michels.  Do Unverifiable Disclosures Matter? Evidence from Peer-to-Peer Lending , 2012 .

[2]  Jeff Galak,et al.  Microfinance Decision Making: A Field Study of Prosocial Lending , 2010 .

[3]  Scott Sonenshein.  We're Changing—Or Are We? Untangling the Role of Progressive, Regressive, and Stability Narratives During Strategic Change Implementation , 2010 .

[4]  Vanessa May,et al.  What is Narrative Analysis , 2010 .

[5]  Americus Reed,et al.  Testing a social-cognitive model of moral behavior: the interactive influence of situations and moral identity centrality. , 2009, Journal of personality and social psychology.

[6]  Allen M. Weiss,et al.  Listening to Strangers: Whose Responses are Valuable, how Valuable are They, and Why? , 2008 .

[7]  Nancy Wong,et al.  The Cultural Construction of Risk Understandings through Illness Narratives , 2008 .

[8]  Martin L. Martens,et al.  DO THE STORIES THEY TELL GET THEM THE MONEY THEY NEED? THE ROLE OF ENTREPRENEURIAL NARRATIVES IN RESOURCE ACQUISITION , 2007 .

[9]  C. Heath,et al.  Where Consumers Diverge from Others: Identity Signaling and Product Domains , 2007 .

[10]  M. Pratt,et al.  Constructing Professional Identity: The Role of Work and Identity Learning Cycles in the Customization of Identity Among Medical Residents , 2006 .

[11]  Avner Caspi,et al.  Online Deception: Prevalence, Motivation, and Emotion , 2006, Cyberpsychology Behav. Soc. Netw..

[12]  J. Morgan,et al.  Cheap Talk , 2005 .

[13]  M. Gilly,et al.  We Are What We Post? Self‐Presentation in Personal Web Space , 2003 .

[14]  Elizabeth Warren,et al.  The Two-Income Trap: Why Middle-Class Mothers and Fathers Are Going Broke , 2003 .

[15]  Dawn S. Carlson,et al.  Interactive effects of personality and organizational politics on contextual performance , 2002 .

[16]  Bradley R. Agle,et al.  Religiosity and Ethical Behavior in Organizations: A Symbolic Interactionist Perspective , 2002 .

[17]  K. Vohs,et al.  Case Western Reserve University , 1990 .

[18]  C. Cramton.  The Mutual Knowledge Problem and Its Consequences for Dispersed Collaboration , 2001 .

[19]  D. Gilbert,et al.  The Preoccupational Hazards of Social Life , 1992 .

[20]  J. Swan,et al.  Trust and inter-organizational networking , 2000 .

[21]  Miemie Neethling,et al.  To fund or not to fund , 2000 .

[22]  M. Engle.  Book Review: Qualitative Data Analysis: An Expanded Sourcebook (2nd Ed.) , 1999 .

[23]  M. Woolcock.  Learning from failures in microfinance : What unsuccessful cases tell us about how group-based programs work , 1999 .

[24]  Duane T. Wegener,et al.  Matching Versus Mismatching Attitude Functions: Implications for Scrutiny of Persuasive Messages , 1998 .

[25]  R. Cialdini,et al.  Social influence: Social norms, conformity and compliance. , 1998 .

[26]  Janet Orosz,et al.  Qualitative Data Analysis: An Expanded Sourcebook, 2d ed , 1997 .

[27]  Kenneth J. Gergen,et al.  Narratives of the self. , 1997 .

[28]  Craig J Thompson.  Caring Consumers: Gendered Consumption Meanings and the Juggling Lifestyle , 1996 .

[29]  J. H. Davis,et al.  An Integrative Model Of Organizational Trust , 1995 .

[30]  D. Gilbert,et al.  The correspondence bias. , 1995, Psychological bulletin.

[31]  Peter Wright,et al.  Persuasion Knowledge , 2022 .

[32]  Eldar Shafir,et al.  Reason-based choice , 1993, Cognition.

[33]  B. R. Schlenker,et al.  Interpersonal Processes Involving Impression Regulation and Management , 1992 .

[34]  John K. Butler.  Toward Understanding and Measuring Conditions of Trust: Evolution of a Conditions of Trust Inventory , 1991 .

[35]  Robin M. Kowalski,et al.  Impression management: A literature review and two-component model. , 1990 .

[36]  J. Bruner.  Acts of meaning , 1990 .

[37]  Mark J. Martinko,et al.  Impression Management in Organizations , 1988 .

[38]  Sidney J. Levy,et al.  Intepreting Consumer Mythology: A Structural Approach to Consumer Behavior , 1981 .

[39]  J. R. Landis,et al.  The measurement of observer agreement for categorical data. , 1977, Biometrics.

[40]  R. Brandis.  The Limits of Organization , 1975 .

[41]  R. Dawes,et al.  Linear models in decision making. , 1974 .

[42]  Donald F. Cox,et al.  Perceived Risk and Consumer Decision-Making—The Case of Telephone Shopping , 1964 .

[43]  E. Goffman.  The Presentation of Self in Everyday Life , 1959 .