The Role of Punctuation in P2P Lending: Evidence from the People’s Republic of China

Publication | October 2017

Too much punctuation in P2P loan descriptions makes them hard to read and lowers the chance of funding and the borrowing rate.

We investigate the role of punctuation in the peer-to-peer (P2P) lending market. Using data from Renrendai, one of the largest P2P lending platforms in the People’s Republic of China, we investigate how the amount of punctuation used in loan descriptions influences the funding probability, borrowing rate, and default. The empirical evidence shows that the amount of punctuation is negatively associated with the funding probability and borrowing rate. We propose that the use of punctuation affects the readability of a loan description and reflects borrowers’ self-control and cognitive ability. Within a given number of words, excessive use of punctuation makes loan description informal and reduces the readability of the text, thereby impairing investors’ trust in borrowers. Moreover, borrowers that overuse punctuation may tend to have lower self-control, underestimate the risk of borrowing, and offer a lower borrowing rate due to overconfidence.

WORKING PAPER NO: 787

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  • Finance sector development