LAUSR

Abstract This study explores the effects of trust on individuals’ access to the peer-to-peer (P2P) lending market. We use data collected from the P2P lending market and the China General Social Survey and find that borrowers from cities with high trust have high borrowing success rates, thereby indicating that lenders prefer high social trust. Results in the successful sample indicate that borrowers with high regional trust also receive low loan costs and large loan amounts. Regression of trust and default proves that borrowers from cities with high social trust have minimal default rates, which may be the channel of our conclusion. Results remain unchanged when using slope and river length as instrumental variables. This research further shows that personal heterogeneity, including income level, whether borrowers work in state-owned enterprises or state agencies, and whether the fund is used for development purposes, affects the impact of social trust. In addition, the conclusions continue to be robust after replacing the explanatory variable, control variable, and sample. Finally, this study determines that fairness plays a consistent role with trust, but happiness plays an opposite role.