Information arrival and its impact on the loan secondary market: Evidence from the COVID-19 crisis

• Increasing COVID-19 (C19) cases prompt price cuts in the secondary market. • National C19 signals outweigh regional ones in decision processes. • This can be explained by lower media attention to regional-level C19 trends. • C19 updates reduce buyer–seller valuation disparities. Using data extracted from Bondora.com, a prominent European peer-to-peer (P2P) lending platform, we investigate the extent to which COVID-19 (C19) information pertaining to Spain and its regions affects the decisions of European investors holding Spain-originated P2P loans. Our results, which are based on panel fixed-effects estimations over the period February-May 2020, suggest that secondary market asset holders lower asset prices in response to nationwide C19 announcements. We also find that buyers on the secondary market are more likely to accept lower prices and that rising C19 infections reduce trading frequency. These results are robust to using lockdown stringency as an alternative C19 information proxy. In most cases, nationwide C19 information is more important than regional updates in the asset valuation process. We explain this finding by the insignificant media attention to regional-level C19 trends. Finally, we document that the mismatch between sellers’ and buyers’ asset valuation in the P2P secondary market is narrowed with the arrival of C19 news. Our findings provide novel evidence on how P2P investors react to public health information shocks, offering new insights into investor attention and price reactions during global crises.