Banks’ Balance Sheets and Liquidation Values: Evidence from Real Estate Collateral

Rodney Ramcharan

The Review of Financial Studies, 2020, vol. 33, issue 2, 504-535

Abstract: This paper finds that declining bank equity or liquidity reduces liquidation values of bank-owned real estate and accelerates the pace of asset sales. Buyers of these assets earn significant returns for providing liquidity to banks, as prices tend to rebound sharply after sales by illiquid banks. Lower liquidation values also depress the prices of nearby real estate transactions. Policy interventions, such as equity injections and central bank asset purchases, increase liquidation values by providing institutions with the balance sheet capacity to slow asset sales. This evidence suggests that balance sheet adjustments at financial institutions can explain real asset price dynamics.Authors have furnished an Internet Appendix, which is available on the Oxford University Press Web site next to the link to the final published paper online.

Date: 2020
References: Add references at CitEc
Citations: View citations in EconPapers (4)

Downloads: (external link)
http://hdl.handle.net/10.1093/rfs/hhz056 (application/pdf)
Access to full text is restricted to subscribers.

Related works:
This item may be available elsewhere in EconPapers: Search for items with the same title.

Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text

Persistent link: https://EconPapers.repec.org/RePEc:oup:rfinst:v:33:y:2020:i:2:p:504-535.

Ordering information: This journal article can be ordered from
https://academic.oup.com/journals

Access Statistics for this article

The Review of Financial Studies is currently edited by Itay Goldstein

More articles in The Review of Financial Studies from Society for Financial Studies Oxford University Press, Journals Department, 2001 Evans Road, Cary, NC 27513 USA.. Contact information at EDIRC.
Bibliographic data for series maintained by Oxford University Press ().