Friendships in online peer-to-peer lending: Pipes, prisms, and relational herding

Liu De, Daniel J. Brass, Yong Lu, Dongyu Chen

Research output: Contribution to journalArticlepeer-review

193 Scopus citations


This paper investigates how friendship relationships act as pipes, prisms, and herding signals in a large online, peer-to-peer (P2P) lending site. By analyzing decisions of lenders, we find that friends of the borrower, especially close offline friends, act as financial pipes by lending money to the borrower. On the other hand, the prism effect of friends' endorsements via bidding on a loan negatively affects subsequent bids by third parties. However, when offline friends of a potential lender, especially close friends, place a bid, a relational herding effect occurs as potential lenders are likely to follow their offline friends with a bid.

Original languageEnglish (US)
Pages (from-to)729-742
Number of pages14
JournalMIS Quarterly: Management Information Systems
Issue number3
StatePublished - Sep 1 2015


  • Friendship relationships
  • Herding
  • Peer-to-peer lending
  • Prism effect
  • Social networks


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