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Riding the wave: How collateral shocks affect corporate financialization

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  • Liu, Jiming
  • Liu, Yi
  • Zhang, Yue
  • Wu, Kai

Abstract

This study examines how collateral shocks affect corporate financialization. Using data on Chinese listed firms from 2008 to 2021, we reveal a positive correlation between the rising market value of firms’ real estate assets and their financial asset holdings. This effect is robust to endogeneity concerns and is more pronounced for firms with weaker analyst coverage, lower growth opportunities, and more conservative risk-taking. We identify credit availability and executive myopia as significant channels driving this relationship. Our results suggest that collateral appreciation primarily affects illiquid financial investments and shadow banking activities. These findings underscore the collateral channel’s crucial role in shaping corporate financial behaviors.

Suggested Citation

  • Liu, Jiming & Liu, Yi & Zhang, Yue & Wu, Kai, 2026. "Riding the wave: How collateral shocks affect corporate financialization," Pacific-Basin Finance Journal, Elsevier, vol. 95(C).
    • Handle: RePEc:eee:pacfin:v:95:y:2026:i:c:s0927538x25003014
    DOI: 10.1016/j.pacfin.2025.102964
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    Keywords

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    JEL classification:

    • G32 - Financial Economics - - Corporate Finance and Governance - - - Financing Policy; Financial Risk and Risk Management; Capital and Ownership Structure; Value of Firms; Goodwill
    • G38 - Financial Economics - - Corporate Finance and Governance - - - Government Policy and Regulation
    • R30 - Urban, Rural, Regional, Real Estate, and Transportation Economics - - Real Estate Markets, Spatial Production Analysis, and Firm Location - - - General

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