Financial Conditions, Local Competition, and Local Market Leaders: The Case of Real Estate Developers

ISER DP No.1130

69 Pages Posted: 19 Apr 2021

See all articles by Ying Fan

Ying Fan

Hong Kong Polytechnic University

Charles K. Leung

City University of Hong Kong

Zan Yang

Tsinghua University

Date Written: April 14, 2021

Abstract

This paper studies whether (and how) corporate decisions are affected by internal factors (such as the financial conditions of own company) and external factors (such as the actions of local competitors) in an imperfectly competitive environment. We study the listed real estate developers in Beijing as a case study. Our hand-collected dataset includes transaction-level information booked indicators (such as profitability, liability, and liquidity) and un-booked financial indicators (political connections). Our multi-step empirical model shows that both the firm's financial conditions and her competitors' counterparts are essential but play different roles in the output design, pricing, and the time-on-the-market (TOM). Internal versus external factors' relative importance relates to the degrees of market concentration in a nonlinear manner. Local market leaders' existence alters the small firms' strategy and leads to higher selling prices and slower selling pace in the local market. Our findings survive various robust checks.

Keywords: Corporate Financial Status, Output Market Decision, Internal and External Driven, Real Estate Developers, Housing Supply

JEL Classification: G11, R30, L10

Suggested Citation

Fan, Ying and Leung, Charles Ka Yui and Yang, Zan, Financial Conditions, Local Competition, and Local Market Leaders: The Case of Real Estate Developers (April 14, 2021). ISER DP No.1130, Available at SSRN: https://ssrn.com/abstract=3829361 or http://dx.doi.org/10.2139/ssrn.3829361

Ying Fan

Hong Kong Polytechnic University ( email )

11 Yuk Choi Rd
Hung Hom
Hong Kong

Charles Ka Yui Leung (Contact Author)

City University of Hong Kong ( email )

83 Tat Chee Avenue
Kowloon
Hong Kong

Zan Yang

Tsinghua University ( email )

Beijing, 100084
China

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