“The Impact of IPO on Peer-to-Peer Lending Platforms” by Mr. Kevin J. Jiao
Mr. Kevin J. Jiao
Ph.D. Candidate in Operations Management
NYU Stern School of Business
New York University
Peer-to-peer lending platforms have become commonplace for individuals and small firms interested in borrowing capital. Our analysis is based on two large peer-to-peer lending online platforms, which we refer to as P1 and P2 . In 2017, these two platforms jointly issued $9.46 billion. We are facing an interesting situation where P1 went public by filing an initial public offering (IPO), while P2 remained privately held. Using large loans data from both platforms, we exploit this empirical environment to carefully infer the impact of IPOs on peer-to-peer lending platforms. Did P1 alter its decisions by accepting different types of loans or by softening its requirements? Or, on the contrary, did its decisions become stricter given the increased level of scrutiny? To answer these questions, we use several econometric tools, including sample selection bias correction, propensity score matching, and synthetic control. We present rigorous empirical analyses at four time events: first IPO rumor, filing date, actual IPO, and quarterly report release. We find that several performance metrics were indeed affected by the IPO filing. Specifically, we observe that (i) the loans’ performance (default rate and return) decreased, (ii) borrowers’ requirements (FICO score and annual income) diminished, and (iii) the acceptance rate inflated. Our findings suggest that P1 may have altered its decisions in anticipation of its IPO by lowering its requirements for accepting loans.