FinTech, particularly digitalized funding has emerged in recent years as an innovative way to finance new ventures. However, funding mediated on digital platforms is “innovative” in itself, and, as such, it can be particularly risk, prone to failures and inefficiencies. We investigate whether peer-to-peer lending, one of the most potentially disruptive forms of digital funding, provides investors with returns consistent with the level of borne risk. By studying over 3000 loans mediated on 68 European platforms we show that the returns are inversely related to loans’ riskiness, suggesting that, on average, loans are mispriced. Our results have important implications for understanding the extent to which financial regulators could be involved in this rapidly growing segment of FinTech.

SPEAKERS

Sofia Johan
Assistant Professor @Florida Atlantic University
Sofia Johan, LL.B, LL.M. in International Economic Law, Ph.D. in Law and Economics, is Assistant Professor of Finance and Fellow of the Phil Smith Center for Free Enterprise at Florida Atlantic University. She is also Chair in Entrepreneurial Finance at the University of Aberdeen Business School and the Extramural Research Fellow at the Tilburg Law and Economics Centre (TILEC) in The Netherlands. She is Associate Editor of the British Journal of Management and will be Co-Editor of Venture Capital: An International Journal of Entrepreneurial Finance in January 2021. Her research is focused on law and finance, sovereign wealth funds, market surveillance, corporate governance, alternative investments and alternative finance. She has co-authored the books titled Crowdfunding: Fundamental Cases, Facts and Insights; Venture Capital and Private Equity Contracting: An International Perspective; and Hedge Fund Structure, Regulation and Performance Around the World.

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