Marketplace Lending, Information Aggregation, and Liquidity

Franks, J, Serrano-Velarde, N and Sussman, O (2021) Marketplace Lending, Information Aggregation, and Liquidity. Review of Financial Studies, 34 (5). pp. 2318-2361. ISSN 0893-9454 OPEN ACCESS


We address a puzzle whereby lending marketplaces, aimed at directly connecting retail lenders and borrowers, retreat from auctions and take on the role of price setting and credit allocation, despite evidence that retail investors possess valuable soft and nonstandard information. Our analysis uses a unique data set on 7,455 auctions and 34 million bids, from the leading British peer-to-business platform. We find that the main problem of the platform was its vulnerability to liquidity shocks, resulting in sizable deviations from information eciency. These increased over time due to a growing role played by non-crowd players, particularly large investors and algorithms.

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Item Type: Article
Subject Areas: Finance
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© The Author(s) 2020. Published by Oxford University Press on behalf of The Society for Financial Studies

This is a pre-copyedited, author-produced version of an article accepted for publication in The Review of Financial Studies following peer review. The version of record: Franks J R, Serrano-Velarde N, Sussman O (2020) "Marketplace Lending, Information Aggregation, and Liquidity", The Review of Financial Studies (In Press) is available online at:

Date Deposited: 02 Jun 2020 09:13
Date of first compliant deposit: 01 Jun 2020
Subjects: Credit selling
Internet services
Last Modified: 05 Dec 2023 01:37

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