Do Unverifiable Disclosures Matter? Evidence from Peer-to-Peer Lending
The Accounting Review · 2012 · Volume 87 · Issue 4
Abstract
The role of disclosure in attenuating market inefficiencies has been the subject of extensive research. While costless, voluntary, and unverifiable disclosures are unlikely to be credible sources of information, prior research demonstrates that individuals' decisions can be influenced by uninformative content. I use a unique dataset from a peer-to-peer lending website,Prosper.com, to demonstrate an economically large effect of voluntary, unverifiable disclosures in reducing the cost of debt. My results show an additional unverifiable disclosure is associated with a 1.27 percentage point reduction in interest rate and an 8 percent increase in bidding activity. Data Availability:All data are publicly available from sources identified in the paper.
Keywords
voluntary disclosure, cost of debt, asymmetric information, microfinance, behavioral economics, Prosper.com
Enable JavaScript for citation tools and additional paper interactions.