Journal of Corporate Finance Vol. 66 2021
What does peer-to-peer lending evidence say about the Risk-Taking Channel of monetary policy?
Abstract
This paper uses loan application-level data from a peer-to-peer lending platform to study the risk-taking channel of monetary policy. By employing a direct ex-ante measure of risk-taking and estimating the simultaneous equations of loan approval and loan amount, we provide evidence of monetary policy's impact on a nonbank financial institution's risk-taking. We find that the search-for-yield is the main driving force of the risk-taking effect, while we do not observe consistent findings of risk-shifting from the liquidity change. Monetary policy easing is associated with a higher probability of granting loans to risky borrowers and greater riskiness of credit allocation. However, these changes do not necessarily relate to a larger loan amount on average.
- DOI
- 10.1016/j.jcorpfin.2020.101845
- Volume
- 66
- Pages
- 101845
- Language
- en
- Sources
- bibtex:phds-export.bib openalex crossref