Abstract: By collecting and processing real data formed in the daily operation of lending platforms, this article finds that under conditions of information asymmetry, the adverse selection of the credit market will lead to two types of market shrinking effects. The first is the "loan reducing" effect: with the deepening of information asymmetry, the final contract amount reached by the borrower and the lender decreases and the transaction matching time extends, and the effective supply of the market shrinks. The second is the "crowding out" effect: as the degree of information asymmetry worsens, the interest rate of the contract between the borrower and the lender will rise, the term will shorten, and the effective market demand will shrink. By improving financial technologies such as artificial intelligence, big data and blockchain, and strengthening the bank-enterprise relationship, information asymmetry can be reduced, thereby alleviating the above-mentioned adverse effects caused by adverse selection.
