Asset price,risk transfer and economic activities: Firm-level evidence from China |
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| Affiliation: | 1. Rand Merchant Bank, 1 Merchant Place, Cnr Fredman Drive & Rivonia Road, Sandton 2196, South Africa;2. Research Associate, Faculty of Economics and Financial Sciences, Department of Finance and Investment Management, University of Johannesburg, PO Box 524, Aucklandpark, South Africa;3. Department of Finance and Investment Management, University of Johannesburg, Aucklandpark 2006, South Africa;1. Department of Business and Economics Studies, University of Naples Parthenope, Italy;2. Department of Law Studies, University of Naples Parthenope, Italy;1. Department of Banking and Finance, National Chi Nan University, Taiwan, ROC;2. Department of Finance, National Yunlin University of Science and Technology, Taiwan, ROC |
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| Abstract: | The paper investigates the extent of the impact from changes in asset price and risk on corporate investment behaviors as well as the real economy. The results support the unidirectional causality effects from asset price fluctuations on the macro-level. By applying quarterly data of Chinese listed companies, we further find the existence of balance sheet effect on the firm-level, which suggests that the changes in asset prices and risk affect the net asset value, and consequently influence corporate investment decisions. More importantly, the balance sheet effect appears to be much more significant after the implementation of new fair value accounting standards in 2007. The impact on the real economy from asset price risk is found to be more prominent as well. |
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| Keywords: | Asset price Balance sheet Risk transfer |
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