How individual investors react to negative events in the fintech era? Evidence from China’s peer-to-peer lending market

Abstract

Inexperienced individual investors are the main players in the emerging FinTech industry, and also suffer from frequent negative events in the markets. With 3,110 negative events and 467,594 transaction data of China’s peer-to-peer lending market from 2015 to 2018, this paper analyzes how different types of platform negative events affect the decision-making of individual investors. We find that individual investors only have a significant negative reaction to moral hazard exposure events such as platforms absconding, with relatively ignorance of other types of negative events. The negative effect is rapid but short-lived, and shows differences among platforms of different background and attributes. By the mediation analysis, we find that public attention can be a mediator and explain the pattern of the impact that absconding events have on individual investors. Related risk prevention, regulation, investor education issues are discussed and further suggestions are also put forward for both individual investors and regulators.