Gender effect on the default risk in peer-to-peer lending markets: The case of the largest Chinese platform

Abstract

Research of gender effect on funding success in peer-to-peer lending markets demonstrates that gender discrimination is a platform-specific phenomenon rather than a common feature. Can we get a similar conclusion about the relationship between gender and credit risk? How do gender differences affect default risk? We try to answer this question using the data of the largest peer-to-peer lending platform RenRenDai spanning from March 2016 to September 2016. In order to avoid the endogeneity problem, this paper first uses the instrumental variable method to conduct a baseline Probit model estimate connecting gender difference to the default rate with several borrowers’ individual characteristics under control. Then the original Probit model and a propensity score matching method aiming to eliminate the effects of divergent observable characteristics are applied to test the robustness of the outcome. Both the baseline estimation and the robustness test show that there is no significant gender effect on the probability of default, ceteris paribus. Therefore, borrowers’ gender is not a good screening device for the P2P lending platform to control the credit risk; other factors should be taken into account to reduce the non-performing loan rate. However, since this paper only investigates the situation of RenRenDai and the data we use is limited, we should be very careful to generalize our findings to other P2P lending platforms. More research on different P2P lending platforms in different regulatory regimes is in necessity