Borsa Istanbul Review 23 (2023) 1474–1486

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Borsa Istanbul Review

journal homepage: www.elsevier.com/journals/borsa-istanbul-review/2214-8450

Asset securitization and bank stock price performance: Bubble increase or

risk transfer?
Qinghan Liu a, Rumiao Li b, Mahmood Ahmad c, d, Zongqiang Ren e, *
a
School of Business, Wenzhou University, Wenzhou 325035, China
b
Zhejiang Financial College, Hangzhou 310018, China
c
Business School, Shandong University of Technology, Zibo 255000, China
d
MEU Research Unit, Middle East University, Amman, Jordan
e
Wenzhounese Economy Research Centre, Wenzhou University, Wenzhou 325035, China

A R T I C L E I N F O A B S T R A C T

Keywords: In this study, we analyzed 40 commercial bank annual reports from 2014 to 2021 to clarify the influence of
Asset securitization tangible and intangible asset securitization on bank stock price bubbles, based on the banks’ preference for
Internal control quality issuing asset securitization. The empirical findings show that tangible asset securitization suppresses the emer­
Liquidity
gence of bank stock price bubbles by improving internal control quality. In contrast, intangible asset securiti­
Stock price bubbles
zation weakens the internal control quality while enhancing bank liquidity, exacerbating stock price bubbles.
Commercial banks
Furthermore, the results of configuration research found interactions between factors that impact bank stock
price bubbles, no single factor is necessary to exacerbate bank stock price bubbles. Additionally, three config­
urations dominate high stock price bubbles in banks: liquidity, credit, and profit risks. The study recommends
that banks develop asset securitization issuance policies, promote business transformation, prevent and resolve
systemic risks, and facilitate capital market improvement and high-quality economic development.

1. Introduction As China’s economy transitions from a factor-driven “incremental

economy” to an innovation-driven “stock economy,” accumulating
Globalization, regulations, and advancements in information tech­ nonperforming assets and bubble risks can trigger systemic risks, leading
nology have transformed the global banking landscape. Banks have to severe economic consequences (Barattieri et al., 2021). Asset securi­
attempted to adopt to these changes in response to mounting competi­ tization, as an innovative tool for commercial banks, provides new av­
tive pressure by diversifying from their traditional business operations enues to alleviate liquidity pressure, improve internal control quality,
into nontraditional avenues. Since the 1990s, banks have broadened and increase profitability (Buchanan, 2017). Moreover, rapidly adjust­
their range of derivative offerings to accommodate their corporate cli­ ing commercial banks’ credit structure enables the disposal of
ents’ diverse guaranteed requirements, with securitization emerging as a off-balance-sheet credit assets in overcapacity sectors, reallocating
crucial instrument. These off-balance-sheet activities have generated credit scales to industries that urgently need support during economic
substantial fee-based income for banks and introduced innovative risk- restructuring. This enables flexible financial support under the con­
mitigation strategies. Conversely, these activities heighten banks’ straints of scale, industry control, and regulatory restrictions (Liu et al.,
exposure to various risk categories, necessitating improved risk man­ 2020).
agement capacity (Instefjord, 2005; Rajan, 2006). The implications of However, in China, the development of asset securitization faces
nontraditional business activities on banks’ risk exposure are of signif­ numerous challenges, such as selecting underlying assets, establishing
icant concern, particularly after the 2008 global financial crisis. The pricing mechanisms, and subsequent supervision (Broer, 2018). These
surge in securitization activities aimed at risk sharing has garnered challenges may often lead to incorrect securities transaction prices,
widespread attention due to their implications for the stability of the further inflating the scale of “virtual finance” through high leverage to
capital market. several times the size of the underlying assets and the real economy

Peer review under responsibility of Borsa İstanbul Anonim Şirketi.

* Corresponding author.
E-mail addresses: lqh@stu.wzu.edu.cn (Q. Liu), Rebecca_lrm@aliyun.com (R. Li), mahmood@sdut.edu.cn (M. Ahmad), renzq@wzu.edu.cn (Z. Ren).

https://doi.org/10.1016/j.bir.2023.10.004
Received 6 May 2023; Received in revised form 13 October 2023; Accepted 13 October 2023
Available online 20 October 2023
2214-8450/© 2023 Borsa İstanbul Anonim Şirketi. Published by Elsevier B.V. This is an open access article under the CC BY-NC-ND license (http://creativecommons.org/licenses/by-nc-nd/4.0/).
Q. Liu et al. Borsa Istanbul Review 23 (2023) 1474–1486

(Gomes & Schmid, 2021). This can cause asset prices to deviate from approach overlooks the impact of stock price bubbles in the financial
their intrinsic value, generate numerous stock price bubbles, and in­ sector, particularly banks, and pays insufficient attention to the influ­
crease banking credit risk. The Government of China has emphasized the ence of specific financial innovation products on the capital market.
need to “focus on preventing and resolving financial risks, overcoming Considerable debate has surrounded the relationship between issuing
the tendency of the economy to deviate from reality toward virtuality, banking financial innovation products and bank stock price stability
and primarily addressing nonperforming assets and bubble risks.” (Degl’Innocenti et al., 2018). Taking Ant Financial’s Huabei as an
Therefore, enhancing the securitization issuance level of Chinese banks example, the Ant Group raised funds that were 14.65 times higher than
and strengthening their internal governance is vital to promote banking its net assets through the asset-backed security (ABS) method. In the
innovation, stimulate the flexibility and resilience of banks, stabilize the event of large-scale defaults, the compounded high-leverage consumer
capital market, and facilitate economic development (Huang et al., credit business could transmit risks to the 350 financial institutions
2021). (including approximately 100 banks) with which it collaborates. This
Asset securitization originated in the United States mortgage market could lead to systemic risks within the banking sector, threatening the
as a strategic response to the repercussions of financial disintermedia­ entire financial industry. Moreover, the legal ambiguity of income right
tion, aiming to enhance the competitiveness of the banking sector. asset securitization adds a certain degree of risk to securitization control
During its earliest stages, this endeavor materialized as residential (Liu & Shao, 2013). Hence, whether asset securitization can help com­
mortgage-backed securities (RMBS), primarily structured around hous­ mercial banks break from the constraints of traditional financing
ing mortgages by serving as their underlying assets. In 2005, China models, stimulate the operational vitality of microlevel business entities,
formally embarked on its own asset securitization journey. However, ameliorate the deep-seated contradictions between economic structure
this journey faced several challenges. The subprime crisis influenced and the irrational allocation of financial resources to promote
regulatory authorities to suspend the asset securitization pilot program high-quality development of the real economy depends on the types of
from 2008 to 2011 as a preventative measure to curtail the propagation asset securitization products commercial banks favor (Abdelsalam et al.,
of inherent risks in the financial landscape. Credit asset securitization 2022).
resumed in May 2012. This reinstatement was notable in light of the Based on this argument, this study utilizes data from asset securiti­
impending impact of interest rate marketization reform and the persis­ zation issued by commercial banks between 2014 and 2021, combining
tent specter of financial disintermediation. Aligning with the strategic qualitative and quantitative methods to distinguish banks’ preferences
priorities of the Chinese government, which highlighted judicious uti­ for asset securitization types. Then, we empirically examine the impact
lization of incremental assets and the revitalization of existing assets, and specific mechanisms of the preferential issuance of tangible and
regulatory entities extended multifaceted policy support to catalyze the intangible asset securitizations on bank stock price bubbles. The findings
evolution of asset securitization (Ngwu & Chen, 2016). According to illuminate several significant outcomes. First, asset securitization of
data from the China Asset Securitization Analysis Network and the tangible assets mitigates the emergence of stock price bubbles, whereas
official website of the People’s Bank of China, by the end of 2021, the that of intangible assets engenders a conducive environment for stock
outstanding amount and number of credit asset securitization reached price bubbles. Second, for banks that prefer issuing asset securitization
RMB 1.74 trillion and 517, respectively, a significant increase compared backed by tangible assets, asset securitization somewhat enhances in­
to RMB 20.1 billion and 7, respectively, in 2012.1 The ratio of credit ternal control quality and suppresses stock price bubbles. Meanwhile,
asset securitization to scale reached 0.91%. Although the proportion for banks that prefer issuing asset securitization backed by intangible
remained below 1%, it was a significant improvement compared to assets, asset securitization tends to weaken the quality of internal con­
0.032% in 2012. Moreover, compared to the near half-century of trols while enhancing bank liquidity, stimulating stock price bubbles.
development in the United States, which has achieved a ratio of 6%, The configuration analysis results indicate that multiple factors are
Chinese credit asset securitization has achieved rapid growth in less than interrelated with asset securitization, resulting in three configurations
a decade. In this context, exploring the influencing factors of credit asset for high stock price bubbles in banks: liquidity, credit, and profit risks.
securitization development is essential. This study contributes to the literature in three ways. First, it ex­
Since credit asset securitization resumed in China in 2012, the amines the relationship between asset securitization and bank stock
framework has encompassed a diverse array of underlying assets, price bubbles. Second, it investigates the impact of two distinct types of
spanning a spectrum including corporate assets, personal consumer asset securitization, namely tangible and intangible asset securitization,
loans, housing mortgages, and loans extended to micro and small en­ on bank stock price bubbles. This analysis encourages banks to tailor
terprises (Zhang et al., 2019). The trend in the distribution of credit asset their issuance strategies based on the cash flow characteristics of these
securitization products confirms two aspects. In terms of scale, the asset securitization types. Third, the study takes specific practical
proportion of corporate loans is decreasing, which is consistent with the measures to mitigate bank stock price bubbles in the context of asset
downward trend in the economic cycle. Meanwhile, in terms of risk securitization. Therefore, this study provides empirical evidence to
distribution, banks are gradually including higher-risk housing mort­ assist commercial banks in mitigating liquidity, credit, and profit risks
gages in the underlying asset pool; moreover, credit asset securitization while fostering the healthy development of the capital market.
based on nonperforming loans is growing (Chubb, 2023). In the asset The remainder of this paper is structured as follows. Section 2 re­
securitization product structure, an increasing number of higher-risk views the literature on asset securitization and bank stock price bubbles.
credit assets are included in the underlying asset pool, posing chal­ Sections 3 and 4 present the empirical analysis, in which we describe the
lenges to internal control management and the stability of bank stock data and variables and present the results. Section 5 is the configuration
prices. Therefore, a systematic study of the relationship between asset analysis, which cites some illustrative cases. In Section 6, we discuss the
securitization and bank stock price bubbles is needed for the further results and describe the main conclusions and policy implications
development of asset securitization in China. derived from the results of this study.
The current literature primarily focuses on listed companies
(excluding the financial sector). Based on information asymmetry the­ 2. Literature review and research hypotheses
ory, these studies investigate the antecedents of stock price bubbles from
two perspectives: audit disclosure and investor behavior. However, this Michie (2012) defines bubbles as a sharp rise in asset prices during a
continuous process, with price increases leading to expectations of
further gains, attracting new traders. Speculators aim to profit from
1
The relevant information is from the official website of China Securitization trading the asset; when prices continue to rise and these expectations
(CNABS).https://v1.cn-abs.com/. reverse, prices may fall and trigger financial crises. Jordà et al. (2015)

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argue that asset price bubbles occur when asset prices asymmetrically continue monitoring borrowers after issuing loans (Albertazzi et al.,
and explosively deviate from their intrinsic value. A positive bubble 2015), resulting in pricing failures in securities transactions, which in
forms when a listed company’s market price exceeds its intrinsic value turn cause severe deviations in asset valuations and stimulate the
(Zhang et al., 2020), whereas a negative bubble forms when the listed emergence of bubbles.
company’s market price is below its intrinsic value (Acharya & Naqvi, In China, securitizing tangible assets entails fixed-asset securitization
2019; Fantazzini, 2016; Fry & Cheah, 2016). Therefore, a bubble refers products based on affordable housing, infrastructure toll rights, com­
to asset prices deviating from their fundamental value, usually charac­ mercial real estate loans, and government and social capital cooperation
terized by continuous, explosive trends, while the fundamental value of (PPP) project repurchases. The securitization of tangible assets has good
assets remains generally stable (Allen et al., 2022; Cayirli et al., 2022). value preservation and appreciation properties, facilitating the pricing
of assets in the pool and monitoring during the product’s lifetime,
2.1. Asset securitization and bubble risks reducing volatility in stock prices. For example, residential mortgage
loans can minimize risk through the residual value after depreciation to
Tangible asset securitization refers to fixed-asset products based on avoid significant depreciation. However, the liquidity provided by
assets such as shed reform housing, affordable housing, infrastructure tangible assets is relatively low, causing some banks to be unwilling to
charging rights, commercial real estate loans, construction-transfer issue them. Furthermore, the lower leverage of tangible compared to
projects (BT), and government and social capital cooperation (PPP) intangible assets may reduce the influence of private information
project repurchases. The overall characteristics are primarily fixed as­ owners, decrease the inducement of speculative behavior, and ulti­
sets with long project recovery cycles. Receivables securitization is mately reduce the occurrence of stock price bubbles (Cipriani et al.,
another category, mainly based on accounts and supply chain receiv­ 2021). Therefore, the first hypothesis is as follows:
ables, with relatively short recovery periods (Zhu et al., 2022). Western
Hypothesis 1. Against the backdrop of financial innovation, the
countries have a long history of a variety of asset securitization products;
securitization of tangible assets can reduce bank stock price bubbles.
in recent years, their impact on financial stability, bank asset quality,
and systemic risk have received attention. Banks may engage in specu­ Hypothesis 1a. Against the backdrop of financial innovation, the
lative activities using asset securitization, such as mortgage-backed se­ securitization of tangible assets can reduce bank stock price bubbles by
curities, which deteriorate bank loan standards due to weak screening, improving the quality of internal controls.
lower rejection rates, and misreporting credit quality, further exacer­
Hypothesis 1b. Against the backdrop of financial innovation, the
bating bank credit risk (Barth et al., 2012). In contrast, Islamic banks can
securitization of tangible assets can reduce bank stock price bubbles by
strengthen asset quality supervision and reduce risk through asset
reducing liquidity.
securitization by restricting security terms, adhering to religious
financing norms, and establishing strict contracts (Abdelsalam et al.,
2022). de Mendonça and Barcelos (2021) compared Brazil’s Credit 2.3. Securitization of intangible assets and stock price bubble
Rights Investment Funds and Real Estate Receivables Certificates to
analyze the impact of securitization on financial institutions’ robustness, Outside of China, there are diverse types of intangible asset securi­
arguing that securitized products with tangible assets significantly tization, adhering to the principle that “all assets can be securitized,”
reduce credit risk compared to those without tangible assets. Further­ such as catastrophe bonds (Hagendorff et al., 2014), longevity risk
more, Phelan & Toda, 2019 argue that ABS can increase asset spans and securitization (Wills & Sherris, 2010), and international drug securiti­
generate substantial total capital flows from a macro perspective. zation (Crick, 2012). In China, intangible asset securitization mainly
Furthermore, capital flows from foreign (high-profit) countries to do­ involves securitization products based on accounts receivable (Zhu
mestic markets lead to lower interest rates, increased global safe asset et al., 2022), including personal consumption loans and nonperforming
supply, and a closer alignment between assets and asset quality, alle­ loan assets. Hollander and Prokop (2015) argue that liquidity conditions
viating the accumulation of financial risks to some extent. are the most direct factor in explaining stock market reactions. The
In summary, the impact of asset securitization on bank stock price market perceives that banks’ unprofitable securitization transactions
bubble risks vary depending on the type of asset securitization and are signal liquidity. Trading in high-quality residential mortgage-backed
closely related to bank liquidity creation and internal governance (Diaz securities (ABS) does not affect abnormal returns; however, providing
& Huang, 2017). To be competitive, a bank must accomplish two core liquidity to commercial mortgage-backed securities and subordinated
tasks: transfer risk and create liquidity (Ahmad et al., 2022). The crea­ RMBS transactions often negatively impacts bank credit. Considering
tion process exposes banks to numerous risks, whereas internal gover­ nonperforming loan securitization as an example, there is a fuzzy asset
nance positively impacts reduction in risk-taking behavior (Beltratti & quality perception between the original equity holder and the investor.
Stulz, 2012). Excessive concealment of bad news can accelerate the formation of stock
price bubbles (Wengerek et al., 2022), and different levels of risk
2.2. Securitization of tangible assets and stock price bubbles tolerance among investors may exacerbate the accumulation of bank
credit risk. Furthermore, banks use the liquidity obtained through
Numerous scholars have explored the economic consequences of securitization to provide loans to risky borrowers while adding leverage;
securitizing tangible assets from a micro perspective. López-Penabad at the same time, the transparency of financial statements does not
et al. (2015), Bakoush et al. (2019), and Nadauld and Weisbach (2012) improve, but instead increases the risk of bank collapse increases (Bat­
examined the impact of securitization on shareholder wealth effects, taglia et al., 2021). Furthermore, due to a rapid increase in leverage and
bank profitability, and bank debt costs, finding that the impact on stock liquidity flooding, securitizing personal consumption loans leads to
prices depends on the risk level of the issued assets. This notion extends excessive financing, soaring stock prices, an overheated economy, asset
to market competition levels, where intense competition weakens the price bubbles, and inflation. As financial leverage increases, the degree
leverage of liquidity generated through securitization, undermining the of virtualization of the global economy increases, resulting in a lack of
firm’s financial stability and exacerbating negative stock price effects. funds in the real economy and facilitating the formation of stock market
Additionally, a lack of adequate securitization transaction disclosures, bubbles. Thus, the second research hypothesis is proposed as follows:
maximizing financial statement “window dressing,” and managerial
Hypothesis 2. Against the backdrop of financial innovation, the
benefits can accumulate financial risks (Mseddi, 2023). Moreover, due
securitization of intangible assets can increase bank stock price bubbles.
to unreliable transmission of information to the market, banks may lack
motivation to screen borrowers sufficiently at the time of issuance or Hypothesis 2a. Against the backdrop of financial innovation, the

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securitization of intangible assets can increase bank stock price bubbles cash flow from operating activities.
by weakening the quality of internal controls. Second, the study predicts the book value of equity per share for the
next two years, b (1)t and b (2)t, using formulas (2) and (3), respectively.
Hypothesis 2b. Against the backdrop of financial innovation, the
Earnings and Dividend represent earnings per share and cash dividends
securitization of intangible assets can increase bank stock price bubbles
per share, respectively.
by improving liquidity.
b(1)t = bt + Earningst+1 − Dividendt+1 (2)
3. Research data and study design
b(2)t = bt + Earningst+2 − Dividendt+2 (3)
3.1. Data sources and sample selection Third, the study calculates the stock’s intrinsic value V by
substituting the estimates into formula (4). Model (4) is a simplification
Given the limited scale and discontinuity of asset securitization in of Ohlson’s (1995) model by Frankel and Lee (1998) for future expected
China before 2014, this study selects annual data from the banking in­ earnings, assuming that the company’s earnings for the next three years
dustry between 2014 and 2021. The asset securitization data are ob­ will be sustained and using analyst forecast earnings for RIM calcula­
tained from the China Asset Securitization Analysis Network, while tions. The capital cost r is set at 5% (Xu & Xu, 2015) to determine f (1), f
bank-level data are sourced from the Guotai and Wind databases. (2), and f (3), which correspond to the earnings of each period.
Some data gaps in the databases are filled by manually collecting in­
formation from publicly disclosed financial reports and using interpo­ Vt = bt +
f（1）t -r∗bt f（2）t -r∗b（1）t f（3）t -r∗b（2）t
+ + (4)
lation to address outliers and individual missing values. By the end of （1 + r） （1 + r）2 （1 + r）3
2021, 142 banks had issued at least one asset securitization product.
Fourth, the study calculates the bank stock price bubble, which is the
However, given that some banks’ annual financial report disclosures are
deviation ratio of the stock’s market value from its intrinsic value, as
incomplete, the sample is further screened in the following manner: first,
represented by formula (5). The stock’s market value, P, is calculated as
excluding data from the three major policy banks; second, ensuring that
the stock’s average closing price on all trading days in the year. Devi­
each bank in the sample had at least three consecutive annual financial
ation measures the absolute deviation degree of market value from
reports; and third, eliminating samples with missing key variables.
intrinsic value, with value range of (0, +∞). The larger the value, the
Finally, financial data from 40 commercial banks are selected. As of
greater the deviation.
2021, the sample banks account for 70.12% of the total assets of China’s
commercial banks, indicating a representative bank sample. Addition­ Deviation = |1-V/P| (5)
ally, macroeconomic data are sourced from the China Financial Year­
book and the official website of the People’s Bank of China. The (2) Explanatory variables: To measure asset securitization (Sec), we
continuous variables at the bank level are winsorized at the 1% and 99% refer to the definitions of asset securitization by An et al. (2021)
percentiles of their distributions to remove extreme values, ensuring as follows: Dummy variable (Secdum), meaning if commercial
robust experimental results. bank i issued asset securitization products in period t, the value is
1; otherwise, the value is 0; Issuance frequency (SECLV), the
number of times commercial bank i issued asset securitization
3.2. Variable selection and measurement products in period t; and Issuance extent (Secext), the logarithm
of the scale of asset securitization issued by commercial bank i in
(1) Dependent Variable: Measuring asset price bubbles has always period t. This paper uses SECLV as the core explanatory variable
been a challenging task in financial economics research. Current and Secext for robustness testing. Additionally, the study manu­
methods generally begin by defining asset price bubbles and ally collected 30 types of asset securitization products issued by
judging whether there is a bubble by calculating the degree of 40 listed commercial banks, including tangible asset securitiza­
stock price deviation from the intrinsic value (calculated through tion products represented by mortgage-backed securities and
the dividend discount model). Then, the residual income model is asset securitization products represented by personal consumer
developed based on the dividend discount model, which clarifies finance. The proportion of tangible asset securitization ranges
the role of accounting information in stock pricing and avoids from 0% to 69.32%. To ensure data validity, this study groups
difficulties in estimating non-dividend-paying enterprise values. banks that prefer to issue tangible asset securitization and those
This study employs four steps to calculate the intrinsic value of that prefer to issue intangible securitization based on the median
stocks. standard (Zhu, 2022). Banks with a tangible asset securitization
ratio of more than 35% are considered to prefer issuing tangible
First, the study estimates the bank’s projected earnings for the next asset securitization, while the rest prefer issuing intangible asset
1–3 years based on Model (1) of Hou et al. (2012): securitization.
Earningsi,t+j = λ0 + λ1 Asseti,t + λ2 Dividendi,t + λ3 DDi,t + λ4 Earningi,t (3) Mediating variables: Following Lu et al. (2015), this study mea­
(1) sures internal control quality based on the DeBull China Listed
+ λ5 NegEni,t + λ6 Accruali,t + μi,t+j
Company Internal Control Index. For the convenience of subse­
where Earningsi,t+j represent the earnings per share of company i in year quent empirical research, this index is divided by 1000 as the
(t + j) (j = 1, 2, 3), calculated as operating profit divided by total share proxy variable for internal control quality. Following Wang
capital. For operating profits after 2007, asset impairment losses should (2017), the liquidity ratio is defined as the ratio of liquid assets to
be added and investment income and gains/losses from changes in fair liquid liabilities.
value should be deducted to ensure consistency in calculations before (4) Control variables: Referring to Guo and Zhang, 2022 and based
and after implementing new accounting standards. Asset is the total on previous research on stock price bubbles and valuation biases,
assets per share; Dividend is the cash dividend per share; DD is a dummy the control variables selected to investigate the impact of asset
variable for dividend distribution, taking the value of 1 if a dividend is securitization on stock price bubbles include bank size (SIZE),
distributed and 0 otherwise; and NegEn is a dummy variable capturing measured by the logarithm of total bank assets; equity concen­
whether accounting earnings are negative, taking the value of 1 if ac­ tration (TOP1); cash flow (CASHFLOW); asset profitability
counting earnings are negative and 0 otherwise. Finally, Accrual rep­ (ROA); capital adequacy ratio (CAR); cost–income ratio (CIR);
resents the accruals per share, calculated as operating profit minus net nonperforming loan ratio (NPL); general money supply growth

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rate (M2); and banking industry prosperity index (Pi). The de­ MEDi,t = θ0 + θ1 ∗ SECLVi,t + δ ∗ xi,t + vi + ui,t (8)
scriptions of the variables are shown in Table 1.
Bubblei,t = ε0 + ε1 ∗ SECLVi,t + ε2 MEDi,t + δ ∗ xi,t + vi + ui,t (9)
3.3. Model construction
Here, MEDi,t is the mediating variable; we selected banks’ internal
1) Asset securitization and stock price bubble model control quality (IC) and liquidity ratio (LIQ) as the variables to examine
the micro-transmission path of asset securitization on bank stock price
To verify Hypotheses 1 and 2 and explore the impact of asset secu­ bubbles; models (2), (3), and (4) are the mediating effect test
ritization on stock price bubbles, we constructed the following econo­ procedures.
metric model:
4. Empirical analysis
Bubblei,t = β0 + β1 SECLVi,t + β2 xi,t + Year + Company + ui,t (6)

The dependent variable is the stock price bubble of commercial 4.1. Descriptive statistics
banks in year t, and the explanatory variable is the scale of asset secu­
ritization of commercial banks in year t. The control variables are Table 2 presents the results of descriptive statics. Based on the
mentioned in Section 3.2. Year and company are dummy variables for sample mean, the average value of bank stock price bubbles is 3.269,
years and enterprises, respectively, and ui,t is the residual term. β0 is the exhibiting an overall downward trend. The mean value of the dummy
constant term, and β2 is the coefficient of the control variables. The variable representing the frequency of asset securitization business
relationship between the two is examined by observing the regression development is 29.784, with a maximum value of 339 and a minimum of
coefficients. 0. Overall, China’s scale of asset securitization is limited to large state-
owned banks, such as Industrial and Commercial Bank of China
2) Asset securitization and stock price bubble transmission mechanism (ICBC) and China Construction Bank (CCB). In contrast, the frequency of
model asset securitization issuance by smaller banks, such Qingdao Rural
Commercial Bank, is relatively low.
Changes in market liquidity affect the issuance of bank wealth
management products. For example, when banks face increased
4.2. Correlation analysis
liquidity regulatory pressure, they issue more wealth management
products to raise funds. Although asset securitization provides great
Table 3 presents the results of the Pearson correlation coefficient test
liquidity for banks, it may also weaken the quality of internal controls.
for each variable. In the full sample, the level of asset securitization is
To verify Hypotheses 1a, 1b, 2a, and 2b and explore the specific path of
significantly positively correlated with bank stock price bubbles at the
asset securitization’s impact on stock price bubbles, we constructed the
1% level.
following econometric models:
Bubblei,t = β0 + β1 ∗ SECLVi,t + δ ∗ xi,t + vi + ui,t (7)
4.3. Regression analysis

Table 1 Model (1) explores the impact of asset securitization on bank stock
Variable descriptions. price bubbles. The estimation results are reported in Table 4 and are
Variable Variable name Measurement Abbreviation consistent with our expectations. The regression results in columns (1)
Type and (2) show that, in the full sample, asset securitization significantly
Dependent Stock Price Bubble Deviation between intrinsic Bubble increases bank stock price bubbles. The regression results in columns (3)
and market values of stocks and (4) indicate that securitizing tangible assets can significantly sup­
Explanatory Asset Commercial banks have SECLV
press stock price bubbles. However, the regression results in columns (5)
Securitization issued asset securitization
products with a value of 1;
and (6) reveal that securitizing intangible assets significantly increases
otherwise, 0 stock price bubbles. This is consistent with our expectations, as securi­
Mediating Internal Control DiBo internal control index IC tizing intangible assets has a higher leverage ratio than securitizing
Quality divided by 1000 tangible assets. Banks generally raise credit thresholds and borrowing
Liquidity Current assets/current LIQ
costs when the economy faces downward pressure. This exacerbates
liabilities
Control Bank Size The logarithm of total assets SIZE social-level financial and structural mismatches, increasing banks’
Ownership Number of shares held by TOP1 financing costs and liquidity risks, leading to stock price declines and
Concentration the largest shareholder/ even crashes, ultimately affecting the stability of the financial market.
total number of shares
Cash Flow Net cash flow from CASHFLOW
operating activities/total Table 2
assets Descriptive statistics of variables.
Asset Return Rate Net profit/average total ROA
Variable Obs. Mean Std. Dev. Minimum Maximum
assets
Capital Adequacy Total capital divided by CAR SECLV 320 29.784 49.109 0 339
Ratio weighted risk assets BUBBLE 320 3.269 2.055 0.0245 12.411
Nonperforming (Substandard loans + NPL IC 320 0.618 0.081 0.280 0.790
Loan Ratio Doubtful loans + Loss LIQ 320 1.113 0.170 0.687 1.605
loans)/total loans SIZE 320 28.036 1.549 24.983 31.191
Cost–income Ratio Total cost/total income CIR TOP1 320 0.270 1.176 0.043 0.831
General Money Growth rate of M2 M2 CASHFLOW 320 0.023 0.090 − 0.402 0.412
Growth Rate ROA 320 0.867 0.214 0.150 1.760
Banking Industry Derived from questionnaires Pi CAR 320 0.133 0.017 0 0.180
Prosperity Index jointly issued by the NPL 320 1.454 0.408 0.420 3.280
People’s Bank of China and CIR 320 0.299 0.083 0 0.664
the National Bureau of M2 320 9.825 1.879 7 13.30
Statistics to bankers Pi 320 67.42 3.479 62.52 72.85

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Table 3
Correlation analysis.
Variables Bubble SECLV SIZE TOP1 CASHFLOW ROA CAR NPL CIR M2 Pi

Bubble 1
SECLV 0.432*** 1
SIZE 0.494*** 0.472*** 1
TOP1 0.268*** 0.231*** 0.677*** 1
CASHFLOW − 0.116** − 0.162*** − 0.141** − 0.068 1
ROA − 0.149*** − 0.112** 0.058 − 0.107* 0.238*** 1
CAR 0.182*** 0.279*** 0.125** 0.030 − 0.083 0.071*** 1
NPL 0.022 0.080 − 0.137** − 0.253*** − 0.042 − 0.188*** − 0.188*** 1
CIR − 0.135** − 0.230*** 0.030 0.361*** − 0.054 − 0.301*** − 0.089 − 0.212*** 1
M2 − 0.231*** − 0.203*** − 0.087 − 0.016 0.333*** 0.284*** − 0.267*** − 0.046 − 0.017** 1
Pi 0.061 0.052 − 0.008 − 0.003 − 0.045 0.137** 0.072 − 0.195*** − 0.005 − 0.353*** 1

Note: Significance level at *p < 0.1, **p < 0.05, ***p < 0.01.

Table 4
Asset securitization on bank stock price bubble results.
Variable Bubble

(1) (2) (3) (4) (5) (6)

SECLV 0.022*** 0.011*** 0.018*** − 0.011* 0.023*** 0.014***

(10.36) (4.97) (3.98) (− 1.72) (9.97) (5.75)
SIZE 2.591*** 5.804*** 1.950***
(7.07) (6.32) (4.89)
TOP1 − 0.901 3.356 − 0.683
(− 0.58) (0.67) (− 0.42)
CASHFLOW − 0.101 − 1.614 0.469
(− 0.13) (− 0.82) (0.55)
ROA − 1.012 − 0.715 − 1.642**
(− 1.55) (− 0.28) (− 2.41)
CAR 5.622 9.815 10.013*
(1.03) (0.61) (1.68)
NPL 0.633*** 1.420** 0.360
(2.69) (2.23) (1.41)
CIR − 1.561 5.098 − 1.920
(− 1.01) (1.20) (− 1.17)
M2 0.090** 0.166* 0.075
(1.99) (1.87) (1.46)
Pi 0.076*** 0.122** 0.073***
(3.59) (2.38) (3.09)
Constant 2.605*** − 75.751*** 4.038*** − 182.458*** 2.207*** − 56.709***
(27.20) (− 6.90) (15.60) (− 6.47) (21.86) (− 4.79)
Observations 320 320 72 72 248 248
Company YES YES YES YES YES YES
Year YES YES YES YES YES YES
R2 0.278 0.411 0.204 0.749 0.302 0.507
F-value 107.3 26.98 15.86 15.86 92.62 21.31

Note. Significance level at *p < 0.1, **p < 0.05, ***p < 0.01.

4.4. Heterogeneity analysis significantly smaller and its significance is decreasing. Most banks in
China belong to the negative bubble group, that is, they are under­
4.4.1. Heterogeneity analysis of stock price bubbles valued, particularly large banks such as the Agricultural Bank of China,
Bank stock price bubbles can be divided into positive and negative CCB, and the Bank of Communications. These banks have stable oper­
bubbles. Positive stock price bubbles develop when the market price of ations, are profitable, and are strictly supervised by the central bank,
the stock exceeds its intrinsic value, whereas negative stock price bub­ resulting in low stock prices and high intrinsic values. In contrast, banks
bles form when the market price is below the intrinsic value (Acharya & in the positive bubble group are often newly listed small banks whose
Naqvi, 2019; Fry & Cheah, 2016). The previous tests have shown that stock prices are easily overestimated in the early stages of development.
asset securitization can intensify stock price bubbles. To gauge the In the long term, stock prices gradually converge to their actual value as
varying effects of asset securitization on positive and negative bubbles, stability is achieved.
this study uses the V/P ratio to define market overvaluation and un­
dervaluation. A V/P ratio greater than 1 indicates that the bank’s market 4.4.2. Heterogeneity analysis of bank characteristics
price is below its intrinsic value, placing it in the negative bubble group. Considering that different types of commercial banks are affected by
Conversely, if V/P < 1, the market price is above its intrinsic value and asset securitization, we divided China’s commercial banks into three
the bank is in the positive bubble group. To validate these conclusions, groups: (1) Big Four/non-Big Four banks, (2) big banks/small banks, and
we input the grouped data into Model (1) for relevant regressions and (3) central SOEs/noncentral SOEs. Fixed effect model regression anal­
lagged it by one period to ensure the robustness of the experimental ysis was conducted on 4 “Big Four” banks, 20 big banks, and 6 central
results. The regression results show that asset securitization intensifies SOEs.
bank stock price bubbles for the overvalued and undervalued groups. (1) First, the impact of asset securitization on the stock price bubbles
However, the regression coefficient for the negative bubble group is of the Big Four banks was significantly negative at the 1% level, while

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the impact on the non-Big Four banks was significantly positive, with generate stock price bubbles. The relevant regression results are
impact coefficients of − 0.036 and 0.014, respectively, meaning that shown in Table 5.
securitization may reduce the stock price bubbles of the Big Four banks, (3) Third, the impact of asset securitization on the stock price bub­
but will increase the stock price bubbles of the non-Big Four banks. The bles of central SOEs was significantly negative at the 1% level,
Big Four banks are ICBC, CCB, Agricultural Bank of China (ABC), and while the impact on the noncentral SOEs was significantly posi­
Bank of China (BOC). These banks have extensive networks in urban and tive with impact coefficients of − 0.019 and 0.014, respectively,
rural areas with the largest number of branches. They are comprehen­ signifying that securitization can reduce the stock price bubbles
sive large-scale listed banks, with subsidiaries covering insurance, of central SOEs, but will increase the stock price bubble of the
leasing, funds, financial investments, and trusts. For example, CCB is the noncentral SOEs. Chinese central SOE banks mainly include the
first commercial bank in China to issue ABS. After years of experience, ICBC, CCB, ABC, BOC, Bank of Communications (BCM), and
CCB has established a professional asset securitization service team, Postal Savings Bank of China. Central SOE banks in China are
providing financial advisories and underwriting services for customers’ more profitable and have a greater asset scale than other banks.
securitization needs. It maintains close connections with trust com­ They are also supported by government policies and have China’s
panies, rating agencies, law firms, and other intermediary institutions in largest customer base. They enjoy a high credit reputation,
the securitization field. Regulatory authorities and the market have equivalent to national credit. Therefore, central SOE banks con­
recognized its work ethic and professionalism. Therefore, the asset ducting asset securitization business have advantages in deposit
quality of China’s Big Four banks is better protected than other banks, base, loan quality, and internal risk control. Their asset quality is
resulting in stock prices that are closer to their true values and reducing more aligned with actual prices, reducing stock price bubbles.
stock price bubbles.

(2) Second, the impact of asset securitization on the stock price 4.5. Robustness test
bubbles of big and small banks was significantly positive at the
1% level, but the impact coefficients increased slightly to 0.008 (1) This study uses the end-of-year closing price to calculate the
and 0.203, respectively. This means that the increased effect of deviation between the stock’s market and intrinsic values and uses it as a
asset securitization on small banks is more significant. Small substitute indicator to measure bank stock price bubbles for robustness
banks are relatively less competitive in traditional business areas; testing. Table 6 describes the robustness test results after changing the
therefore, developing an asset securitization business has a measurement indicators. The coefficient of the first regression result
greater impact on improving financial performance. Compared to between asset securitization and bank stock price bubbles is − 0.011,
big banks, which support government financial innovation pol­ which is significantly negative, indicating that an increase in tangible
icies through asset securitization, small banks are focused on the asset securitization can significantly suppress stock price bubbles. In
profitability of asset securitization. In situations with limited re­ contrast, the coefficient of the second regression result between asset
sources, they may choose lower-quality loans as underlying as­ securitization and bank stock price bubbles is 0.013, which is signifi­
sets, which, coupled with a lack of corresponding regulation, may cantly positive, indicating that an increase in nontangible asset securi­
tization can significantly promote stock price bubbles. The robustness
test results are consistent with the previous benchmark regression

Table 5
Heterogeneity analysis results.
Variables Bubble

(1) Positive Bubble (2) Negative (3) (4) (5) Big (6) Small (7) Central SOEs (8) NoncentralSOEs
Bubble Big Four Non-big
Four

SECLV 0.081*** 0.010*** − 0.036*** 0.014*** 0.008*** 0.203*** − 0.019** 0.014***

(3.38) (4.56) (− 3.89) (6.07) (3.42) (8.30) (− 2.47) (5.78)
SIZE 1.829** 2.648*** 33.277*** 2.333*** 3.937*** 1.612*** 10.143*** 2.269***
(2.24) (5.70) (4.01) (6.13) (7.41) (3.50) (4.47) (5.79)
TOP1 − 1.052 − 1.452 − 23.237* − 0.792 − 0.117 1.266 0.392 − 0.795
(− 0.16) (− 0.91) (− 1.86) (− 0.49) (− 0.07) (0.54) (0.07) (− 0.48)
CASHFLOW − 2.031 0.144 − 7.366 − 0.109 − 0.603 − 0.226 0.386 − 0.203
(− 1.08) (0.16) (− 0.66) (− 0.13) (− 0.43) (− 0.25) (0.04) (− 0.25)
ROA − 3.010* − 0.820 31.282** − 1.631*** − 0.781 − 0.855 − 1.739 − 1.771***
(− 1.84) (− 1.13) (2.45) (− 2.60) (− 1.01) (− 1.03) (− 0.62) (− 2.73)
CAR − 13.510 8.278 − 62.199 9.418* − 0.895 3.009 − 35.426 8.861
(− 0.87) (1.41) (− 1.36) (1.65) (− 0.15) (0.35) (− 1.38) (1.51)
NPL − 0.146 0.721** 3.672** 0.111 0.224 − 0.030 0.554 0.086
(− 0.25) (2.58) (2.22) (0.42) (0.54) (− 0.10) (0.55) (0.32)
CIR − 2.983 − 0.627 − 26.730 − 1.051 3.144 − 1.013 3.326 − 1.733
(− 1.16) (− 0.31) (− 0.93) (− 0.66) (1.39) (− 0.53) (0.70) (− 1.03)
M2 0.221** 0.067 − 0.231 0.090* 0.071 0.106 0.170 0.098*
(2.35) (1.30) (− 1.21) (1.86) (1.39) (1.65) (1.64) (1.92)
Pi 0.094* 0.070*** − 0.040 0.074*** 0.055** 0.057* 0.100 0.079***
(1.97) (2.94) (− 0.40) (3.18) (2.20) (1.84) (1.50) (3.26)
Constant − 49.911** − 78.295*** − 1022.207*** − 67.302*** − 116.340*** − 45.606*** − 306.729*** − 65.264***
(− 2.11) (− 5.57) (− 4.03) (− 5.83) (− 7.08) (− 3.34) (− 4.45) (− 5.50)
Observations 80 240 32 288 160 160 48 272
Company YES YES Yes Yes Yes Yes Yes Yes
Year YES YES Yes Yes Yes Yes Yes Yes
R2 0.469 0.554 0.750 0.526 0.714 0.556 0.659 0.520
F-value 5.298 24.84 5.392 26.90 32.45 16.29 6.190 24.72

Note. Significance level at *p < 0.1, **p < 0.05, ***p < 0.01.

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Table 6
Robustness test results.
Variable Bubble

Changing Dependent Variables Changing Explanatory Variables Changing Sample Intervals Supplementing Control Variables

Tangible (1) Intangible (2) Tangible (3) Intangible (4) Tangible (5) Intangible (6) Tangible (7) Intangible (8)

SECLV − 0.011* 0.013*** − 47.006* 12.594*** − 0.020* 0.017*** − 0.011* 0.012***

(− 1.70) (5.44) (− 1.80) (5.09) (− 1.82) (4.72) (− 1.85) (5.34)
SIZE 5.769*** 1.988*** 5.765*** 2.338*** 3.920*** 0.573 4.861*** 1.445***
(6.10) (4.95) (6.12) (5.85) (3.01) (1.24) (4.75) (3.62)
TOP1 3.439 − 0.523 3.426 − 1.194 0.027 0.540 2.251 − 0.884
(0.67) (− 0.32) (0.67) (− 0.73) (0.53) (0.34) (0.46) (− 0.57)
CASHFLOW − 1.100 0.374 − 1.062 0.451 − 2.604 0.184 − 1.012 0.778
(− 0.54) (0.43) (− 0.53) (0.52) (− 1.20) (0.26) (− 0.52) (0.94)
ROA − 1.049 − 1.626** − 1.200 − 2.302*** − 1.538 − 1.409* − 2.650 − 1.540**
(− 0.40) (− 2.37) (− 0.46) (− 3.39) (− 0.69) (− 1.80) (− 0.98) (− 2.34)
CAR 12.876 9.850 13.969 11.684* − 0.067 7.640 3.240 6.995
(0.78) (1.64) (0.85) (1.93) (− 0.37) (1.00) (0.20) (1.20)
NPL 1.471** 0.335 1.498** 0.424 1.446 0.109 1.194* 0.120
(2.24) (1.30) (2.28) (1.64) (1.54) (0.32) (1.89) (0.48)
CIR 4.854 − 1.517 4.907 − 2.740* 0.073 − 0.512 5.106 − 3.197*
(1.11) (− 0.92) (1.12) (− 1.66) (1.64) (− 0.30) (1.23) (− 1.97)
M2 0.168* 0.073 0.170* 0.139** 0.085 0.002 0.176** 0.035
(1.83) (1.41) (1.86) (2.57) (0.79) (0.03) (2.03) (0.69)
Pi 0.140** 0.074*** 0.143*** 0.108*** 0.125 0.007 0.120** 0.033
(2.66) (3.10) (2.73) (4.48) (1.57) (0.25) (2.41) (1.27)
RWR − 1.917 − 1.675*** − 1.944* − 1.904***
(1.56) (− 3.14) (− 1.91) (− 4.02)
Constant − 182.758*** − 58.260*** − 183.263*** − 69.780*** − 118.800*** − 11.446 − 148.319*** − 35.698***
(− 6.48) (− 4.89) (− 6.33) (− 5.86) (− 2.86) (− 0.84) (− 4.52) (− 2.89)
Observations 72 248 72 248 54 186 72 248
Company YES YES YES YES YES YES YES YES
Year YES YES YES YES YES YES YES YES
R2 0.744 0.498 0.746 0.492 0.641 0.448 0.766 0.544
F-value 15.40 20.52 14.54 20.06 5.520 10.35 15.47 21.91

Note. Significance level at *p < 0.1, **p < 0.05, ***p < 0.01.

findings. The third and fourth columns replace the explanatory variable while coefficient ε1 is − 0.002, indicating a complete mediation effect
with the scale of asset securitization issuance; the regression results are (Appendix A1). This indicates a significant mediating effect accounting
consistent with expectations. These columns show the regression results for 73.95% of the total effect (θ1 ∗ ε2 /β1 ), suggesting a mediating effect
after considering the impact of the pandemic and excluding data from with internal control quality as the mediating variable. The results
2020 to 2021. The coefficients for SECLV are − 0.020 and 0.017; they are demonstrate that securitization of real assets enhances commercial
significant at the 10% and 1% levels, respectively, indicating the banks’ internal control levels by diversifying operational risks and
robustness of the regression results. The seventh and eighth columns are reducing information asymmetry, thereby curbing stock price bubbles.
based on the third and fourth columns along with another control var­ In contrast, for securitization of nonreal assets, Table 8 columns (5) and
iable—risk-weighted asset ratio (RWR). The regression results are sig­ (6) show that asset securitization weakens banks’ internal control
nificant at the 10% level, indicating that the empirical results are robust quality and exacerbates stock price bubbles due to the numerous and
and reliable. complex types of nonreal asset securitization and the use of immature
(2) This study addresses the endogeneity issue related to the impact securitization techniques in China, which significantly increase the
of asset securitization on bank stock price bubbles following the difficulty of internal bank supervision.
approach of An et al. (2021). Data on the issuance volume of ABS by the Second, considering the liquidity level of real assets, we examine the
top 10 underwriters from 2014 to 2021 were collected. We derived the partial mediating effect of the liquidity ratio using the mediation effect
instrumental variable (Sec-P) for each bank’s relative underwriter testing procedure. This may be because real asset securitization provides
issuance volume by matching each bank’s annual issuance volume to the insufficient liquidity compared to nonreal asset securitization, has a
total issuance volume of all banks during this period. The two-stage least relatively smaller leverage ratio, and real assets account for a smaller
squares regression model tested the relationship using this instrumental proportion of the securitization issuance scale, leading to insignificant
variable. Table 7 presents the regression results (1)–(4), showing that results. However, from the perspective of the nonreal asset liquidity
the instrumental variable significantly correlates with bank stock price level, the regression results in columns (7) and (8) indicate that asset
bubbles at the 10% level or higher. This finding is consistent with the securitization significantly enhances bank liquidity and stabilizes bank
conclusions drawn from the baseline models (1)–(2). income expectations, substantially increasing bank stock prices. Nonreal
asset securitization mainly involves virtual economies; hence, the
bursting of the bubble can easily lead to stock price collapses. In sum­
4.6. Mechanism analysis mary, only internal control quality mediates the impact of real asset
securitization on bank stock price bubbles. Conversely, internal control
Following the research approach outlined in Section 2, we employ a quality and liquidity mediate the impact of nonreal asset securitization
mediation effect model to investigate the micro-impact mechanism of on bank stock price bubbles; thus, Hypotheses 1a, 1b, 2a, and 2b are
asset securitization on commercial bank stock price bubbles from the validated.
perspectives of internal control quality and liquidity level. First, we
examine the mediating effect of internal control quality in real asset
securitization. According to columns (1) and (2) of Table 8, coefficients
θ1 and ε2 are significantly positive at the 5% and 1% levels, respectively,

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Table 7 China did not begin its asset securitization business until 2005; before,
Two-stage least squares regression results with instrumental variables. most commercial banks primarily engaged in traditional interest rate
Variable Tangible assets Intangible assets spread businesses with relatively limited product scale and innovation.
After the 2008 economic crisis, Chinese commercial banks’ demand for
First stage Second stage First stage Second stage
(IV) (IV) (IV) (IV) international development increased as international trade and capital
flows accelerated. However, regulatory measures in China became
SECLV Bubble SECLV Bubble
stricter to maintain financial market stability and control risks, leading
(1) (2) (3) (4) to more rigorous supervision of asset securitization. Therefore,
Sec-P 0.002*** 0.009*** compared to before 2008, the asset securitization business became more
(2.70) (0.0006) standardized, partially mitigating the negative impact on bank stock
SECLV − 0.031* 0.006***
prices.
(− 1.67) (2.63)
SIZE 1.898 − 1.330*** 11.582*** 0.782***
(0.71) (− 2.92) (3.65) (7.24) 5. Further analysis of bank stock price bubbles
TOP1 27.507** 2.580 − 27.167 − 1.966***
(0.209) (0.227) (− 1.61) (− 2.78) The previous sections have demonstrated that asset securitization
CASHFLOW 22.819 − 4.807 − 4.381 0.778
affects bank stock price bubbles and depends on the specific form of
(0.61) (− 0.99) (− 0.27) (1.13)
ROA − 89.612*** − 5.716** − 30.639* − 2.588*** issuance. Thus, the analysis is further expanded to explore whether other
(− 4.19) (− 2.19) (− 2.14) (− 4.68) factors influence bank stock price bubbles, and whether there is a
CAR 1282.232*** 84.506*** − 166.846 15.713** linkage effect with bank asset securitization business, to identify various
(4.11) (2.61) (− 0.47) (2.54)
influencing configurations. By holistically employing quantitative
NPL 1.942 2.371** 4.828 0.589**
(0.23) (1.80) (0.71) (2.11)
comparative analysis (QCA), this study analyzes the causal relationships
CIR − 137.380*** − 5.592 − 95.844*** − 1.794 between asset securitization and commercial bank stock price bubbles.
(− 3.20) (− 1.11) (− 0.38) (− 1.56) Additionally, it conducts a cross-case comparison analysis based on the
M2 0 .754 − 0.216 0.858 − 0.003 levels of other risk factors, explores the influence paths of the configu­
(0.63) (− 0.63) (0.77) (− 0.06)
rations of antecedent factors on the results, and reveals the complex
Pi 1.830** 0.123 1.637** 0.053*
(2.39) (1.29) (0.031) (1.87) causal mechanisms of the factors influencing commercial bank stock
BOA − 1.052 0.997** 1.764 0.406 price bubbles. Moreover, the fuzzy-set QCA method uses Boolean
(− 0.26) (− 2.36) (0.63) (3.48)*** algebra and does not make assumptions or impose constraints on control
Constant − 217.154* 33.355** − 337.644** − 23.211*** variables; thus, it does not omit variable biases and is closer to the dy­
(− 2.02) (2.95) (− 2.27) (− 5.67)
Company Yes Yes Yes Yes
namic and complex objective reality than traditional regression methods
Year Yes Yes Yes Yes (Ragin & Strand, 2008).
Observations 72 72 248 248 The condition variables are asset securitization, internal control
R2 0.8074 0.669 quality, liquidity, bank size, bank profitability, and bank nonperforming
F-value 24.79 42.45
loan ratio. The outcome variable is bank stock price bubbles.
Note. Significance level at *p < 0.1, **p < 0.05, ***p < 0.01.
5.1. Variable calibration
4.7. The impact of 2008 financial crisis analysis
Following the mainstream QCA research, this study sets the points of
Negative external events, such as economic crises, often lead to full membership, crossover, and full nonmembership of the outcome
significant uncertainty in the global economy and have far-reaching variable (bank stock price bubbles) and the six condition variables to the
impacts on the international economic landscape. Therefore, the 95%, 50%, and 5% quantile values of the case sample descriptive sta­
impact of the 2008 financial crisis on the main effects is notable. As we tistics, respectively (Thiem, 2022). Calibrating nonhigh stock price
had only collected samples of commercial bank asset securitization from bubbles is achieved by taking the “non-set of high stock price bubbles.”
2014 to 2021 and considering that China began engaging in asset Table 10 shows the fuzzy points of each variable.
securitization business only in 2005, in addition to the temporary halt in
asset securitization activities after the 2008 crisis, we supplemented our 5.2. Analysis of necessary conditions
data collection with samples from 2005 to 2008 and 2012–2013. We
obtained a dataset comprising 40 listed banks in China, amounting to Regarding the criterion for discerning necessary conditions, this
560 samples. Subsequently, we employed group regression, the study refers to previous research and applies 0.9 as the consistency
difference-in-differences (DID) model, and a moderated effects analysis threshold for essential analysis. Table 11 shows that no necessary con­
to examine the impact of the 2008 financial crisis on the main effects. ditions constitute a high or nonhigh level of digital economy.
Due to space constraints, we only show the results of grouped re­
gressions in the main text, and the DID model and moderating effects are 5.3. Configurational analysis of the causes of bank stock price bubbles
shown in Appendix A2.
Group regression analysis divides the data into groups based on the We set the original consistency threshold at 0.85, the PRI consistency
period before and after the 2008 financial crisis. In this approach, we threshold at 0.8, and the frequency threshold at 2. At this stage, the
conducted group regression using commercial bank asset securitization sample size of commercial banks meets the minimum 70% standard.
data samples from before and after 2008. The regression results are Following the presentation of existing research findings, this paper re­
shown in Table 9. ports intermediate solutions, supplemented by parsimonious solutions.
According to the regression results, the impact of securitization on Table 12 presents the configurational results for high and nonhigh stock
bank stock price bubbles was significant at the 1% level before and after price bubble scenarios, in which the individual and overall solutions
the 2008 financial crisis. However, before the crisis, the coefficient of display consistency levels above the minimum standard of 0.8.
asset securitization was 1.067, whereas it was 0,009 after the crisis,
signifying that the stimulating impact of asset securitization on the stock 1) Liquidity Risk-Dominated Model: The liquidity risk-dominated
price bubble of banks is weakening. This weakening trend is because model of bank stock price bubbles, identified by Configuration S1,
is based on two core conditions: bank size and liquidity. This path’s

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Table 8
Mediation effect test results.
Variable Tangible assets Intangible assets

(1) (2) (3) (4) (5) (6) (7) (8)

IC BUBBLE LIQ BUBBLE IC BUBBLE LIQ BUBBLE

SECLV 0.001** − 0.002 0.000 − 0.011* − 0.001*** 0.006*** 0.001*** 0.010***

(2.19) (− 0.45) (0.54) (− 1.77) (− 6.29) (2.71) (5.58) (4.12)
IC − 8.134*** − 10.500***
(− 5.65) (− 8.49)
LIQ 1.263 2.551***
(0.82) (3.96)
SIZE − 0.217*** 4.035*** 0.358*** 5.352*** − 0.029 1.650*** 0.174*** 1.507***
(− 3.12) (5.08) (4.34) (4.99) (− 1.48) (4.77) (4.18) (3.75)
TOP1 0.000 3.678 0.000 0.033 0.037 − 0.291 0.082 − 0.893
(0.10) (0.92) (0.04) (0.66) (0.47) (− 0.21) (0.49) (− 0.57)
CASHFLOW − 0.294* − 4.008** − 0.393** − 1.117 − 0.002 0.451 0.070 0.290
(− 1.97) (− 2.47) (− 2.22) (− 0.54) (− 0.04) (0.61) (0.79) (0.35)
ROA 0.504** 3.386 0.633*** − 1.514 0.120*** − 0.387 − 0.141** − 1.281*
(2.59) (1.57) (2.75) (− 0.55) (3.61) (− 0.64) (− 1.99) (− 1.92)
CAR − 0.024* − 9.962 0.016 0.078 − 0.697** 2.699 3.244*** 1.736
(− 2.00) (− 0.76) (1.12) (0.48) (− 2.41) (0.52) (5.23) (0.28)
NPL 0.044 1.777*** − 0.011 1.434** 0.010 0.467** 0.089*** 0.132
(0.91) (3.48) (− 0.20) (2.24) (0.83) (2.12) (3.36) (0.52)
CIR − 0.004 1.629 − 0.002 0.054 − 0.012 − 2.043 − 0.293* − 1.173
(− 1.32) (0.47) (− 0.60) (1.26) (− 0.15) (− 1.44) (− 1.71) (− 0.73)
M2 − 0.021*** − 0.005 − 0.004 0.171* − 0.004* 0.029 − 0.011** 0.104**
(− 3.11) (− 0.06) (− 0.51) (1.91) (− 1.75) (0.66) (− 2.12) (2.08)
Pi − 0.011*** 0.036 − 0.001 0.123** − 0.003** 0.046** 0.010*** 0.049**
(− 2.71) (0.84) (− 0.26) (2.40) (− 2.24) (2.23) (3.89) (2.05)
Constant 7.874*** − 118.407*** − 10.202*** − 169.577*** 1.610*** − 39.808*** − 4.606*** − 44.957***
(3.68) (− 4.71) (− 4.02) (− 5.24) (2.81) (− 3.83) (− 3.73) (− 3.81)
Company YES YES YES YES YES YES YES YES
Year YES YES YES YES YES YES YES YES
Ob 72 72 72 72 248 248 248 248
R2 0.412 0.845 0.634 0.753 0.404 0.562 0.636 0.542
F-value 6.775 25.74 9.195 14.39 14.02 32.56 36.20 22.17

Note. Significance level at *p < 0.1, **p < 0.05, ***p < 0.01.

underlying mechanism is that higher levels of liquidity accumulation

Table 9 restrict banks’ ability to adjust their credit portfolios and weaken
Grouped regression results.
credit behavior (particularly for high-risk banks). Ultimately, they
Variable Before 2008 After 2008 obstruct the transmission process from increased bank risk appetite
Bubble (1) Bubble (2) Bubble (3) Bubble (4) to enhanced credit behavior and form a “blocking effect” on banks’
SECLV 0.930*** 1.067*** 0.015*** 0.009***
risk-taking channels (Xiang et al., 2023). This path suggests that due
(11.29) (11.44) (7.88) (5.02) to the large size of some banks, the substantial amounts involved in
SIZE 0.212** 0.663*** issuing single ABS, and the leverage effect, banks can easily allocate
(2.55) (5.71) longer-term loans while increasing liquidity, creating conflicts in
TOP1 0.735 − 2.565*
maturity matching and increasing liquidity risks. If not
(0.81) (− 1.80)
CASHFLOW 0.416 − 0.524 well-regulated, this may cause fluctuations in bank stock prices.
(0.34) (− 0.66) Notable examples include Silicon Valley Bank and the ICBC. For
ROA − 0.157 − 2.867*** instance, the recent collapse of Silicon Valley Bank was due to a
(− 0.29) (− 6.19) mismatch between asset and liability loan maturities, long-term risk
CAR 1.972 8.037**
(0.88) (2.09)
compression, and the exposure of liquidity risk, which served as a
NPL − 0.554 0.025 warning for large Chinese banks. ICBC maintains the largest asset
(− 1.26) (0.11) scale in the global banking industry and is the largest issuer of ABS in
CIR − 1.520 − 2.760* China. A single “Ningbo Bank’s Nonperforming Loan Securitization”
(− 0.76) (− 1.88)
issuance involved 2.6 billion nonperforming loans, including some
M2 − 0.133** − 0.006
(− 2.39) (− 0.23) unsecured and non-repurchase committed products. Once faced with
Pi 0.026* 0.046*** liquidity risk, this fragile bubble can easily trigger systemic bank
(1.97) (4.17) risk. Although China’s banking supervision is increasingly stringent,
Constant 3.452*** − 1.285 2.980*** − 15.720*** with indicators such as net stable funding ratio in place, vigilance
(56.93) (− 0.45) (37.39) (− 4.33)
Observations 160 160 400 400
must be heightened to prevent problems from occurring.
Company YES YES YES YES 2) Credit Risk-Dominated Model: The credit risk-dominated model of
Year YES YES YES YES bank stock price bubbles, identified by Configuration S2, is centered
R2 0.517 0.598 0.149 0.406 on the two core conditions of bank size and credit. This path’s un­
F-value 127.5 16.35 62.15 23.68
derlying mechanism is that severe credit risk can result in a lack of
Note. Significance level at *p < 0.1, **p < 0.05, ***p < 0.01. liquidity in banks, ineffective internal management mechanisms, and
a significant reduction in the efficiency of bank asset allocation,
leading to a bubble economy that threatens the banks’ survival. This
path indicates that ABS processed by banks result in debtors being

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Table 10
Fuzzy set scores for variables.
Results and condition Target set Full membership Crossover point Nonmembership

Research Object Bank Stock Price Bubbles 6.53 3.04 0.48

Core Explanatory Factor Asset Securitization 136.75 7.5 0
Bank Attributes Bank Size 30.75 27.74 25.77
Bank Liquidity Risk Liquidity Ratio 1.37 1.11 0.81
Bank Transparency Internal Control Quality 0.73 0.63 0.47
Bank Profitability Return on Total Assets 1.20 0.88 0.51
Bank Credit Risk Nonperforming Loan Ratio 2.16 1.46 0.82

projects to improve its situation and achieve established profit

Table 11
goals, or lend to clients with poor credit to obtain higher returns,
Configuration analysis of factors contributing to bank stock price bubbles.
thereby increasing its risk level. This path indicates that there are
Condition Variables High Stock Price Bubble Nonhigh Stock Price Bubble still some listed banks in China whose profitability does not match
Consistency Coverage Consistency Coverage their asset quality, such as Shanghai Pudong Development Bank and
Asset securitization 0.692326 0.827042 0.395723 0.493733 other city commercial banks. Faced with economic downward
~Asset securitization 0.576200 0.477251 0.861376 0.745162 pressure, their profitability growth has slowed down; profitability is
Bank size 0.781264 0.757638 0.502991 0.509458 the basic guarantee for banks to transmit their credit value, market
~Bank size 0.494161 0.487695 0.760714 0.784126 value, and liquidity to society. Additionally, Shanghai Pudong
Bank liquidity risk 0.748675 0.700258 0.582525 0.569067
~Bank liquidity risk 0.539273 0.552930 0.693169 0.742310
Development Bank was fined RMB 400,000 by the Shanghai Banking
Bank transparency 0.573306 0.551300 0.729915 0.733090 Regulatory Bureau for violating prudent operation rules due to
~Bank transparency 0.722435 0.719182 0.553242 0.575227 provisioning pressure. The reason for this is related to bank credit
Bank profitability 0.604465 0.600581 0.661936 0.686911 card business. The “cooling off” of credit card businesses will affect
~Bank profitability 0.684888 0.659831 0.615104 0.618936
bank profitability, the decline of which would simultaneously trigger
Bank credit risk 0.640715 0.648442 0.616780 0.651959
~Bank credit risk 0.656106 0.621103 0.667411 0.659883 the bank’s credit and liquidity risk. When this “double risk” accu­
mulates, the bank will become unrealistic and threaten asset quality
and intrinsic value. Therefore, in the context of accelerated global
unable to clearly understand the internal information of assets, interest rate cuts and the launch of the domestic labor protection
causing information asymmetry and generating bank stock price rate, alleviating the increasingly narrow net interest margin and
bubbles. Moreover, as the scale of the asset securitization market stabilizing asset quality is a key issue for commercial banks.
expands, flaws in the pricing mechanism and asset quality issues are
gradually exposed, leading to a rapid accumulation of credit risk. 6. Conclusion and policy implications
Notable examples include Jinzhou Bank, Baoshang Bank, and
Hengfeng Bank. Jinzhou Bank has historically prioritized expansion 6.1. Conclusion
while neglecting internal control construction, resulting in many
questionable off-balance sheet investments, demonstrating that its Based on bank preferences for issuing asset securitization, this study
aggressive investment strategy to increase revenue exposes it to classifies the types of asset securitization as tangible and intangible and
significant credit risk. Therefore, it is important to control the scale investigates their impact on the capital market. Empirical research
of the asset securitization market reasonably, align asset prices shows, first, that tangible asset securitization can suppress the emer­
closely with their actual value, reduce bubble formation, and prevent gence of stock price bubbles, while intangible asset securitization can
systemic banking risk. stimulate the emergence of stock price bubbles, verifying Hypotheses 1
3) Profit Risk-Dominated Model: The dominant profit risk type of stock and 2. Second, for banks that prefer to issue tangible asset securitization,
price bubble, revealed by the S3 configuration, is characterized by asset securitization can somewhat enhance the internal control quality
bank profitability and transparency. This path’s underlying mecha­ and suppress the emergence of stock price bubbles, verifying Hypothesis
nism is that commercial banks have a clear profit motive when 1a. However, tangible assets do not significantly impact bank liquidity;
engaging in various business activities. When the bank’s profitability thus, Hypothesis 1b is not verified. The above conclusions remain un­
is low, it tends to choose riskier business strategies and high-risk changed after robustness tests such as using alternative explanatory

Table 12
Configurations of high/nonhigh stock price bubbles in commercial banks.
Condition variables High commercial bank stock price bubble Nonhigh commercial bank stock price bubble

S1 S2 S3 S1 S2 S3

Asset Securitization • • • • ⊗ •
Bank Size ● ● ⨂ ⨂ ⨂
Bank Liquidity Risk ● • ● ⨂
Bank Transparency ⊗ ⊗ ● ●
Bank Profitability ⨂ ⨂
Bank Credit Risk ● ● ●
Consistency 0.930591 0.946729 0.325839 0.918903 0.915924 0.933185
Raw Coverage 0.433428 0.391721 0.0183296 0.494121 0.543841 0.369848
Unique Coverage 0.0990921 0.0573851 0.962447 0.0438285 0.0762368 0.0139468
Overall Program Consistency 0.93303 0.8816
Coverage of the Overall Program 0.509143 0.625723

Note:In this table, •represents the presence of a peripheral condition, ●indicates a core condition, ⊗signifies the absence of a core condition, and ⊗denotes the absence
of a peripheral condition.

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variables, additional control variables, and instrumental variable Appendix A. Supplementary data
methods to reduce endogeneity. One possible reason is that tangible
assets generally have poor liquidity; therefore, they do not have a sig­ Supplementary data to this article can be found online at https://doi.
nificant impact on stock price bubbles. Finally, for banks that prefer to org/10.1016/j.bir.2023.10.004.
issue intangible asset securitization, asset securitization can weaken the
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