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All That Glitters is Not Gold: Examining the Negative Impact of Real Estate Value on Companies' Market Competitiveness

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Listed:
  • Fangzhi Liang

    (Xiamen University)

  • Gary Gang Tian

    (Macquarie University)

  • Zhihua Wei

    (Xiamen University)

  • Aimin Zeng

    (Zhejiang Gongshang University)

Abstract

This paper introduces and investigates the hypothesis that the crowding-out effect surpasses the collateral effect, suggesting that an increase in the value of real estate holdings by companies hinders their competitiveness in the product market within emerging economies. Through our analysis, we elucidate the underlying mechanism, demonstrating that although Chinese listed companies benefit from their real estate holdings in terms of debt financing, these financial resources are predominantly reinvested in real estate projects rather than other productive endeavors. This effect is particularly pronounced when companies face significant financial constraints, operate in highly monopolistic industries, and are situated in regions where local governments heavily rely on land finance and face substantial pressure for GDP growth. By shedding light on the adverse implications of companies' real estate holdings and uncovering the factors contributing to the crowding-out effect, our research underscores the importance of enhanced regulations in the real estate markets of developing nations during the periods of irrational housing booms.

Suggested Citation

  • Fangzhi Liang & Gary Gang Tian & Zhihua Wei & Aimin Zeng, 2025. "All That Glitters is Not Gold: Examining the Negative Impact of Real Estate Value on Companies' Market Competitiveness," The Journal of Real Estate Finance and Economics, Springer, vol. 71(4), pages 722-766, November.
    • Handle: RePEc:kap:jrefec:v:71:y:2025:i:4:d:10.1007_s11146-024-09981-4
    DOI: 10.1007/s11146-024-09981-4
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    JEL classification:

    • D21 - Microeconomics - - Production and Organizations - - - Firm Behavior: Theory
    • G32 - Financial Economics - - Corporate Finance and Governance - - - Financing Policy; Financial Risk and Risk Management; Capital and Ownership Structure; Value of Firms; Goodwill
    • R32 - Urban, Rural, Regional, Real Estate, and Transportation Economics - - Real Estate Markets, Spatial Production Analysis, and Firm Location - - - Other Spatial Production and Pricing Analysis

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