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Why do borrowers default on online loans? An inquiry of their psychology mechanism

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In the online microloan market, the ability to evaluate the credit risk of borrowers is key to business success. Based on the general strain theory, this study proposes a contextualized two-stage model with stress factors, negative affects and constraint factors to explain the psychological mechanism of borrowers' default behaviors.


An online survey is conducted to test the hypotheses. We collect and analyze 713 valid responses through a structural equation model.


(1) Economic and social strains experienced by borrowers can cause four types of negative affects: life dissatisfaction, perceived unfairness, inferiority feeling and loneliness; (2) Both strains and negative affects have a considerable effect on borrowers' default intention; (3) Moral norm plays a negative moderating role in the relationship between strains, negative affects and default behavior, whereas perceived deterrence shows a strong main effect.


(1) This study introduces the GST from sociology and criminology, and contextualizes it in the microloan context to explain default behavior; (2) This study provides a comprehensive and staged psychological mechanism to explain deviant behavior; (3) This study bears critical implications for the current practice in credit assessment and default prevention.
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Keywords: Credit assessment; Default intention; General strain theory; Microloan; Negative affects; Psychology

Document Type: Research Article

Affiliations: 1: School of Economics and Management, Nanjing University of Science and Technology, Nanjing, China 2: School of Management, Fudan University, Shanghai, China

Publication date: April 10, 2020

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