When a city experiences a housing bubble, local companies in completely unrelated industries start manipulating their financial records.
April 1, 2026
Original Paper
Real Estate Bubbles and Corporate Leverage Manipulation:Evidence from China
SSRN · 6504476
The Takeaway
Real estate bubbles drain available credit from the market, making it harder for normal businesses to get loans. To keep banks from cutting them off, firms that have nothing to do with property start faking their debt levels to appear more financially stable than they actually are.
From the abstract
Against the backdrop of a deep adjustment in China’s real estate market and the parallel implementation of macro-level deleveraging policies, this paper uses city-level real estate data and measures housing bubbles by employing the GSADF method and combines it with firm-level data from listed companies to examine their impact on corporate leverage manipulation and underlying mechanisms.The results show that real estate bubbles significantly increase leverage manipulation, with stronger effects o