Anti-Corruption Reforms and Microfinancing: Evidence from Households' Fintech Borrowing

Abstract

Despite a surging literature in investigating different impacts of corruption and/or anticorruption from firms' perspective, it is still unclear whether and how corruption and/or anti-corruption affect households' borrowing behaviour. In this paper, we focus on a Chinese online peer-to-peer lending market and analyse the impact of the recent China's anti-corruption campaign on households' borrowing costs. We employ a Difference-inDifferences (DID) estimation strategy and investigate three exogenous shocks regarding the movement: 1) the 2012 Eight Point Policy announcement; 2) multiple rounds of the Central Inspection Team Campaigns during 2013 and 2014; 3) and the anti-corruption rules for military-related personnel in early 2015. Our results show that equilibrium interest rates of borrowers pertaining to Non-SOEs dropped significantly comparing to that of SOEs and/or government agencies in the wake of the first two events. Borrowers affiliating with military-related institutions were also worsened after the military specific anti-corruption campaign. Finally, we examine the two possible economic channels. Suggestive evidences show that both a rise of interest risk premium for SOEs borrowers and a better outlook of Non-SOEs after the anticorruption reform could account for the observed favour of the borrowing costs towards Non-SOEs borrowers. These findings are consistent with previous studies regarding the effects of anti-corruptions from firms' aspects such as Lin et al., (2016) and Griffin et al., (2016). This study also complements the P2P literature by demonstrating the importance of online borrowers' occupations / job affiliations.