Dr. Le Zhang is an Associate Professor of Finance with the College of Business and Economics at the Australian National University. He works in the field of corporate finance, including mergers and acquisitions, governance, and issues in emerging markets. His research has been published in leading academic journals such as the Review of Financial Studies, Journal of Financial Intermediation, Financial Management, and Journal of Banking and Finance. He has won many awards for his work, including the Pearson Prize for the Best Paper published in Financial Management.

We examine the informational role of moral norms in online lending markets. Using data from one of the largest peer-to-peer lending platforms in China, we show that borrowers from regions with stronger moral norms measured by the strength of local Confucian culture are more likely to be funded and receive more campaign proceeds relative to loan size. Moreover, borrower moral norms result in favorable lending outcomes through the channels of enhancing the creditworthiness and predictability of borrower behaviors. Ex post analysis suggests that borrowers from regions with stronger moral norms have lower loan default probabilities, and their lenders enjoy higher returns. Taken together, our findings reveal the unique role of moral norms in enhancing transaction efficiency by mitigating the adverse selection and moral hazard problems in peer-to-peer lending.