Real Assets, Liquidation Value and Choice of Financing

31 Pages Posted: 16 Apr 2019

See all articles by Crocker H. Liu

Crocker H. Liu

Arizona State University

Peng Liu

Cornell University - S.C. Johnson College of Business - School of Hotel Administration

Zhipeng Zhang

Barclays - Barclays Global Investors (BGI)

Date Written: Summer 2019

Abstract

We use real estate firms to examine how asset liquidation values influence a firm's financing choice, because the productivity and quality of each asset is observable and potential measures of an asset's liquidation value are easier to ascertain ex ante. We show that compared to firms that issue equity, firms that issue debt have higher asset quality. The effect of their expected asset liquidation value is significant, even after we control for other factors that influence financing decisions. For firms whose assets' quality is not easily observable, we find that firms' financing choices depend heavily on conditions in the overall real estate market.

Suggested Citation

Liu, Crocker H. and Liu, Peng and Zhang, Zhipeng, Real Assets, Liquidation Value and Choice of Financing (Summer 2019). Real Estate Economics, Vol. 47, Issue 2, pp. 478-508, 2019, Available at SSRN: https://ssrn.com/abstract=3372516 or http://dx.doi.org/10.1111/1540-6229.12148

Crocker H. Liu (Contact Author)

Arizona State University ( email )

W.P. Carey School of Business
P.O. Box 873906
Tempe, AZ 85287-3906
United States
480-965-3259 (Phone)
480-965-8539 (Fax)

HOME PAGE: http://www.public.asu.edu/~chliu1

Peng Liu

Cornell University - S.C. Johnson College of Business - School of Hotel Administration ( email )

448 Statler Hall
Ithaca, NY 14853
United States
6072542960 (Phone)

Zhipeng Zhang

Barclays - Barclays Global Investors (BGI) ( email )

45 Fremont Street
San Francisco, CA 94105
United States

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