Marketplace lending - A study of the relationship between alternative lenders and commercial banks

Sammanfattning: Using a conceptual framework developed by Tang (2019), this paper examines whether Marketplace lending platforms operate as substitutes or complements to bank lending in terms of borrower credit quality and loan size. Employing data on 85,660 loans funded by LendingClub from 2009-2012, we investigate the relative difference in U.S. areas affected by the regulation of FAS 166/167. We use a difference-in-difference method where areas affected by the regulation constitute a treatment group and unaffected areas a control group. When allowing for geographical heterogeneity we find that MPLPs serve borrowers of lower credit quality than banks and simultaneously attract a fraction of borrowers with access to bank credit. In terms of loan size, however, MPLPs operate as a substitute i.e. originates loans of the same sizes as banks. When adding time fixed effects to our model, it provides no evidence on what relationship is taking place on a loan size dimension.