Macro-prudential policy and systemic risk of real estate firms: Evidence from China

Xiao-Lin Li, Lijuan Wang and Dongmin Kong

Finance Research Letters, 2023, vol. 58, issue PC

Abstract: Using data of listed real estate firms (REFs) in China, we examine how macro-prudential policy affects their systemic risk. Employing a two-dimensional measure of systemic risk contribution and vulnerability, we find that macro-prudential policy reduces both dimensions of systemic risk. Deleveraging and lowering risk interconnectedness are two plausible channels. Asset-based policy instruments, including loan-to-value limits, are more effective than capital- and liquidity-based instruments. Moreover, rational use of macro-prudential tools helps stablize REFs’ operating performance by reducing their systemic risk. Our findings highlight the critical role of macro-prudential policy in balancing risk prevention and economic growth.

Keywords: Real estate firms; Systemic risk; Macro-prudential policy; Deleveraging; Risk interconnectedness (search for similar items in EconPapers)
Date: 2023
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Citations: View citations in EconPapers (5)

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Persistent link: https://EconPapers.repec.org/RePEc:eee:finlet:v:58:y:2023:i:pc:s1544612323008905

DOI: 10.1016/j.frl.2023.104518

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