Abstract: This paper, taking a special regulatory policy released in China's P2P market as a natural experiment, valuate the impact of policy introduction and the effect of platforms' compliance process on the change of platforms' transaction scale. The main findings are that:(1)The introduction of the policy had a significant positive impact on the volume of P2P platforms, and it was more significant for the platforms with specific backgrounds, platforms with current bid, and platforms whose executives have had worked as senior manager in other companies. (2)By using DID specification and treatment effects, this paper test the causal relationship between platforms' compliance process and transaction scale, and found compliance transformation has a positive effect on transaction scale, although it was only effective for those join in bank escrow earlier. (3)Although joining bank escrow leads investors to invest more,it reduces the average investment period which means that the process of compliance transformation can influence the decision between scale and period. This paper proves that there was a risk substitution effect between period decision and scale decision for the first time.

Key words: P2P lending, regulatory policy, compliance transformation, P2P transaction scale