The signaling effects of education in the online lending market: Evidence from China |
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| Affiliation: | 1. Department of Obstetrics and Gynecology, Jewish General Hospital, McGill University, Montréal, QC;2. Centre for Clinical Epidemiology and Community Studies, Jewish General Hospital, McGill University, Montréal, QC;1. Department of Otolaryngology, Boston University Medical Center, 800 Harrison Ave BCD 5th floor, Boston, MA, USA;2. Department of Otolaryngology, Icahn School of Medicine at Mount Sinai, 1 Gustave L. Levy Pl, New York, NY, USA;3. Department of School of Medicine, University of Rochester Medical Center, Rochester, NY, USA |
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| Abstract: | In this study, we use data from an online lending platform named Xinxindai in China to empirically study the signaling effects of education for the default risk of borrowers. Three dependent variables are created, namely, the probability of default, overdue payments and overdue amount, and probit models, count models and Tobit models are employed correspondingly. The number of universities in the “211 Project” of China at the city level is employed as the instrumental variable. The empirical evidence shows that education generally plays a strong signaling role in the identification of borrowers’ default risk in China. The negative marginal effect of education declines as borrowing times increase and as the marketization of regions deepens. This study helps to fill an important gap in the existing literature. Platforms and lenders can use educational level for reference in identifying the default risk of borrowers. |
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| Keywords: | Default risk Online lending Educational level Signaling effect |
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