Bounded Kindness in Non-profit Online Lending: A Social Identity Theory Perspective

As a crucial factor affecting individual preference and economic decision making, social identity is a persuasive element revealing the home bias in online lending. Using the data from a non-profitable online lending platform, we explore the impact of geographical identity on lenders’ investment intention. Results show that geographical identity can promote the lender's lending behavior: borrowers and lenders from the same country or geographically close are more likely to trade. The closer the geographical distance is, the higher the financing probability is, and the higher the average financing amount is. This study shows that kindness is bounded. Notably, social identity is introduced into online lending as a theoretical lens explaining social identity recognition and home bias on the lending platform. A better understanding of home bias can provide theoretical and practical implications.