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The Impact of Venture Capital Investment on the Performance of Peer‐to‐Peer Lending Platforms: Evidence from China
Author(s) -
Gu Dingwei,
Lu Tian,
Luo Pinliang,
Zhang Chenghong
Publication year - 2019
Publication title -
asia‐pacific journal of financial studies
Language(s) - English
Resource type - Journals
SCImago Journal Rank - 0.375
H-Index - 15
eISSN - 2041-6156
pISSN - 2041-9945
DOI - 10.1111/ajfs.12276
Subject(s) - venture capital , investment (military) , business , china , panel data , database transaction , corporate governance , monetary economics , peer to peer , financial system , finance , industrial organization , economics , econometrics , distributed computing , politics , political science , computer science , law , programming language
The Chinese peer‐to‐peer (P2P) lending market is expanding quickly but has a relatively poor level of operation. Using panel‐structured data from a leading P2P lending portal in China, we investigate the effects of venture capital (VC) investment on the performance of P2P lending platforms. Specifically, we identify a short‐term signaling effect and a long‐term governance effect of VC investment on platform performance in terms of transaction volume, and numbers of lenders and borrowers. However, we only find a decrease in average interest rates after venture capitalists’ (VC s’) entry in the long run. Moreover, we verify both the effects of investment from listed VC s, but no signaling effect and a weak governance effect of investment from non‐listed VC s. Our analysis provides new insights into how VC investment improves the performance of target firms.