Social Capital, Transaction Trust and Information Asymmetry: an Experimental Study on Online Peer-to-Peer Lending

Online peer to peer (P2P) lending, where lending individuals make unsecured microloans to borrowing individuals, has experienced significant growth since its inception in 2005. The factors that influence the lending willingness however have not been well studied. Drawing on the social capital and social cognitive theory and using China's online P2P lending market as a backdrop, this study examines the factors influencing lenders' trust and lending willingness. The results reveal that borrowers with more social capitals have more trust from lenders. This relationship is stronger for lenders with greater perception of information asymmetry toward online lending markets.