Analysis on the Effectiveness of Internet Lending Credit Certification Based on Income and City Favor Phenomenon

YAO Bo

（Institute of Internet Finance and National School of Development, Peking University, Beijing 100871, China）

 

Abstract

The income and city favor phenomenon is very common during finance lending market, but the research about relationship among them and lending behavior is scarcity extremely. Based on transaction data of Renrendai website platform, this paper researches two questions: firstly, is there a income and city favor phenomenon during lender’s decision, or isn’t? secondly, does the promoting credit certification mechanism improve match efficiency loss due to favor phenomenon, or doesn’t? This research shows that internet lending decreases transaction cost and information asymmetry, promotes lending behavior among strangers, at the same time, the advancement of credit certification mechanism, can resolve the unreasonable and external tabbed favor phenomenon effectively, and push forward to promote match efficiency of lending further. Key words: Credit Certification; Internet Lending; Income and City; Borrowing Order