Wealth Effect of Asset Securitization in Real Estate and Infrastructure Sectors: Evidence from China

Abstract We investigate the wealth effect of asset securitization in real estate and infrastructure sectors on issuing firms, based on data from 859 listed companies in China, the world’s largest developing country. The data come from a manual match to securitization issuance records, spanning from 2014 to 2021. Our findings indicate a positive wealth effect for firms engaged in the asset securitization activities. Our analysis supports the finance hypothesis as an explanation for this wealth effect. Specifically, we find that the asset securitization is utilized for debt repayment purposes, with a more pronounced wealth effect observed in environments of financial tightening. Additionally, non-state-owned enterprises (non-SOEs) with greater financing constraints experience greater benefits. This study contributes to the literature on the wealth effect of nonfinancial asset securitization by offering empirical evidence from a representative developing country. Our findings provide significant implications for companies holding high-quality, illiquid fixed assets in real estate and infrastructure sectors, as well as for policymakers seeking to foster the development of these sectors in developing countries.