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Shadow Bank, Risk-Taking, and Real Estate Financing: Evidence from the Online Loan Market

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Listed:
  • Xiaoying Deng

    (Singapore Management University)

  • Chong Liu

    (Shanghai University of Finance and Economics)

  • Seow Eng Ong

    (National University of Singapore)

Abstract

This paper examines whether and how individual risk-taking behavior affects real estate financing through shadow banks. Using the loan data from an online platform in China, we show that riskier households tend to employ online loans to meet the increasing down-payment in their home purchase. Individual investors are likely to fund riskier real estate loans with higher expected returns. Real estate loans experience higher ex-post default rates than other types of loans. The effect is more pronounced during the period of credit constraints.

Suggested Citation

  • Xiaoying Deng & Chong Liu & Seow Eng Ong, 2024. "Shadow Bank, Risk-Taking, and Real Estate Financing: Evidence from the Online Loan Market," The Journal of Real Estate Finance and Economics, Springer, vol. 68(1), pages 1-27, January.
    • Handle: RePEc:kap:jrefec:v:68:y:2024:i:1:d:10.1007_s11146-022-09936-7
    DOI: 10.1007/s11146-022-09936-7
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    More about this item

    Keywords

    Online Lending; Risk Taking; Real Estate Loans; House Purchase Restrictions;
    All these keywords.

    JEL classification:

    • G21 - Financial Economics - - Financial Institutions and Services - - - Banks; Other Depository Institutions; Micro Finance Institutions; Mortgages
    • G28 - Financial Economics - - Financial Institutions and Services - - - Government Policy and Regulation
    • R21 - Urban, Rural, Regional, Real Estate, and Transportation Economics - - Household Analysis - - - Housing Demand
    • R30 - Urban, Rural, Regional, Real Estate, and Transportation Economics - - Real Estate Markets, Spatial Production Analysis, and Firm Location - - - General

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