The Fifth China International Credit and Risk Management Conference

The 5th China International Credit and Risk Man- agement Conference was held on September 24- 26 in Xiamen,Fuiian province.More than 600 enterprises,mainly from the fields of import and export trade,manufacturing and finance,sent their repre-

Consumer lending efficiency:commercial banks versus a fintech lender

Fintechs are believed to help expand credit access to underserved consumers without taking on additional risk.We compare the performance efficiency of LendingClub’s unsecured personal loans with similar loans originated by banks.Using stochastic frontier estimation,we decompose the observed nonperforming loan(NPL)ratio into three components:the best-practice minimum NPL ratio,the excess NPL ratio,and a statistical noise,the former two of which reflect the lender’s inherent credit risk and lending inefficiency,respectively.As of 2013 and 2016,we find that the higher NPL ratios at the largest banks are driven by inherent credit risk,rather than lending inefficiency.Smaller banks are less efficient.In addition,as of 2013,LendingClub’s observed NPL ratio and lending efficiency were in line with banks with similar lending volume.However,its lending efficiency improved significantly from 2013 to 2016.As of 2016,LendingClub’s performance resembled the largest banks–consistent with an argument that its increased use of alternative data and AI/ML may have improved its credit risk assessment capacity above and beyond its peers using traditional approaches.Furthermore,we also investigate capital market incentives for lenders to take credit risk.Market value regression using the NPL ratio suggests that market discipline provides incentives to make less risky consumer loans.However,the regression using two decomposed components(inherent credit risk and lending inefficiency)tells a deeper underlying story:market value is significantly positively related to inherent credit risk at most banks,whereas it is significantly negatively related to lending inefficiency at most banks.Market discipline appears to reward exposure to inherent credit risk and punish inefficient lending.

The Effects of Professional Managers＇ Credit on Their Work Performance： Firm Owners＇ Trust and Credit Identification Mechanisms

Finding successors for private enterprises has become an urgent problem in recent years, partially because those firms＇ owners lack trust in professional managers. Previous research on agents focuses on preventing opportunistic behavior and neglects the value of their entrepreneurship. In our research, professional managers＇ credit is divided into three dimensions： personal credit, professional credit and operational credit. Using a sample of 379 firm owners from 27 provinces in China, we find that credit and its detailed dimensions are positively related to private owners＇ trust in professional managers. We also found that a rigorous and effective credit identification mechanism positively moderate the above relationships. Furthermore, trust affects professional managers＇ work performance in a positive way. Accordingly, we advise that （1） professional managers＇ credit assessment system should be established and improved; （2） professional managers and enterprise owners should attach importance to enhancing professionalism and promoting rigorous credit identification mechanisms; （3） the closed-loop of the credit-trust psychologically interactive mechanism based on credit mechanisms and credit identification mechanisms should be put to use.