Asset Securitization and Firm Expansion in Product Markets: Evidence from the Real Estate Development Industry

72 Pages Posted: 24 May 2021

See all articles by Chao Ma

Chao Ma

WISE & SOE, Xiamen University

Date Written: May 21, 2021

Abstract

Previous studies found that through facilitating “bankruptcy remoteness,” asset-backed securitization can reduce firms’ borrowing costs and probabilities of facing credit constraints and increase their market values. However, little research has examined the real effect of securitization on firms’ product-market activities. We examine the real estate development industry and find that after securitization, developers become more aggressive in purchasing land and entering new markets. With extra funding from securitization, financially constrained developers become more likely to purchase a parcel independently, whereas developers with capacity constraints conduct more strategic alliances with other developers in purchasing a parcel to utilize more production capacities.

Keywords: Asset-backed Securitization, Production Expansion, Entry, Strategic Alliances, Land Purchase

JEL Classification: G2, G3, L1, L7, R3

Suggested Citation

Ma, Chao, Asset Securitization and Firm Expansion in Product Markets: Evidence from the Real Estate Development Industry (May 21, 2021). Available at SSRN: https://ssrn.com/abstract=3850503 or http://dx.doi.org/10.2139/ssrn.3850503

Chao Ma (Contact Author)

WISE & SOE, Xiamen University ( email )

A 307, Economics Building
Xiamen, Fujian 10246
China

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