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Winner's Curse or Signaling? Bidding Outcomes in the Chinese Land Market

Author

Listed:
  • Xiaolong Liu

    (University of Groningen)

  • Weidong Qu

    (Renmin University of China)

Abstract

Since its liberalization in 2003, the urban land lease market in China has experienced substantial growth in terms of both the volume and value of transactions. At the same time, significant transaction premiums are observed in these land transactions; these premiums make the general public skeptical about the emergence of a property market bubble that stems from aggressive bidding in the land market. In this paper, we seek to rationalize this phenomenon by means of the event study method. By using a land transaction dataset from Beijing for the period 2003 to 2013, we find that the capital market reacts significantly to land bidding events. In addition, the land transaction premium observed in the Chinese land market can be explained by the signaling effect, in that developers tend to use the bidding price as a signaling device to disseminate favorable private information to the marketplace.

Suggested Citation

  • Xiaolong Liu & Weidong Qu, 2015. "Winner's Curse or Signaling? Bidding Outcomes in the Chinese Land Market," International Real Estate Review, Global Social Science Institute, vol. 18(1), pages 113-129.
    • Handle: RePEc:ire:issued:v:18:n:01:2015:p:113-129
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    References listed on IDEAS

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    Cited by:

    1. Shi, Song & Wu, Shuping & Yang, Zan, 2023. "Competitive Advantages of Hong Kong Land Development Firms in Mainland China: A Tale of Initial Success and Subsequent Decline," Working Paper Series 23/8, Royal Institute of Technology, Department of Real Estate and Construction Management & Banking and Finance.
    2. Zan Yang & Shuping Wu, 2019. "Land acquisition outcome, developer risk attitude and land development timing," The Journal of Real Estate Finance and Economics, Springer, vol. 59(2), pages 233-271, August.

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    More about this item

    Keywords

    Winner's Curse; Signaling; Land Transactions;
    All these keywords.

    JEL classification:

    • L85 - Industrial Organization - - Industry Studies: Services - - - Real Estate Services

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