TY - JOUR
T1 - The Digital Credit Divide
T2 - Marketplace Lending and Entrepreneurship
AU - Cumming, Douglas
AU - Farag, Hisham
AU - Johan, Sofia
AU - McGowan, Danny
PY - 2022/9/1
Y1 - 2022/9/1
N2 - We conjecture that marketplace lending provokes an increase in the quantity of entrepreneurship, particularly in more regionally disadvantaged areas, albeit at lower average quality. Using a fuzzy regression discontinuity design that exploits exogenous variation in borrowers’ access to marketplace loans along US state borders, we estimate a 10% increase in marketplace lending causes a 0.44% increase in business establishments per capita. The effects are more pronounced for less experienced entrepreneurs, for small and less profitable firms, firms more dependent upon external finance, in industries with lower sunk costs of entry, and for low-income regions with inferior access to financial institutions.
AB - We conjecture that marketplace lending provokes an increase in the quantity of entrepreneurship, particularly in more regionally disadvantaged areas, albeit at lower average quality. Using a fuzzy regression discontinuity design that exploits exogenous variation in borrowers’ access to marketplace loans along US state borders, we estimate a 10% increase in marketplace lending causes a 0.44% increase in business establishments per capita. The effects are more pronounced for less experienced entrepreneurs, for small and less profitable firms, firms more dependent upon external finance, in industries with lower sunk costs of entry, and for low-income regions with inferior access to financial institutions.
KW - Fintech
KW - credit supply
KW - entrepreneurship
U2 - https://doi.org/10.1017/S0022109022000357
DO - https://doi.org/10.1017/S0022109022000357
M3 - Article
JO - Journal of Financial and Quantitative Analysis
JF - Journal of Financial and Quantitative Analysis
ER -