COVID‑19 pandemic risk and probability of loan default: evidence from marketplace lending market

Nigmonov, Asror and Shams, Syed ORCID: https://orcid.org/0000-0001-9209-0418 (2021) COVID‑19 pandemic risk and probability of loan default: evidence from marketplace lending market. Financial Innovation, 7 (1):83. pp. 1-28.

[img]
Preview
Text (Published Version)
s40854-021-00300-x.pdf
Available under License Creative Commons Attribution 4.0.

Download (1MB) | Preview

Abstract

As the COVID-19 pandemic adversely affects the financial markets, a better understanding of the lending dynamics of a successful marketplace is necessary under the conditions of financial distress. Using the loan book database of Mintos (Latvia) and employing logit regression method, we provide evidence of the pandemic-induced exposure to default risk in the marketplace lending market. Our analysis indicates that the probability of default increases from 0.056 in the pre-pandemic period to 0.079 in the post-pandemic period. COVID-19 pandemic has a significant impact on default risk during May and June of 2020. We also find that the magnitude of the impact of COVID-19 risk is higher for borrowers with lower credit ratings and in countries with low levels of FinTech adoption. Our main findings are robust to sample selection bias allowing for a better understanding of and quantifying risks related to FinTech loans during the pandemic and periods of overall economic distress.


Statistics for USQ ePrint 45594
Statistics for this ePrint Item
Item Type: Article (Commonwealth Reporting Category C)
Refereed: Yes
Item Status: Live Archive
Faculty/School / Institute/Centre: Current - Faculty of Business, Education, Law and Arts - School of Business (18 Jan 2021 -)
Faculty/School / Institute/Centre: Current - Faculty of Business, Education, Law and Arts - School of Business (18 Jan 2021 -)
Date Deposited: 20 Jan 2022 00:06
Last Modified: 09 Aug 2022 05:17
Uncontrolled Keywords: Peer-to-peer lending, COVID-19, Coronavirus, Default risk, Marketplace lending, Pandemic, FinTech, Shadow banking
Fields of Research (2008): 15 Commerce, Management, Tourism and Services > 1502 Banking, Finance and Investment > 150201 Finance
15 Commerce, Management, Tourism and Services > 1502 Banking, Finance and Investment > 150299 Banking, Finance and Investment not elsewhere classified
Fields of Research (2020): 35 COMMERCE, MANAGEMENT, TOURISM AND SERVICES > 3502 Banking, finance and investment > 350299 Banking, finance and investment not elsewhere classified
Identification Number or DOI: https://doi.org/10.1186/s40854-021-00300-x
URI: http://eprints.usq.edu.au/id/eprint/45594

Actions (login required)

View Item Archive Repository Staff Only