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This chapter examines the acquisition of assets (real estate) and companies in the Chinese real estate industry. We propose a nuanced view of state ownership (beyond state being the largest shareholder) and argue that firms with a combination of state and private ownership may be in a unique position to acquire real assets. We conduct an analysis of the growth and funding of the industry for the period and also analyze the successful acquisitions in the industry over 2004–2007. Our analysis is supportive of the nuanced view about state-owned enterprises (SOEs) and their advantageous position for acquiring real estate assets from the government. Our analysis also sheds light on the two-stage marketization process in the Chinese real estate industry where SOEs endowed with real estate assets are sold to non-SOEs.

Real estate investment has been generally accepted as a value-adding proposition for a portfolio investor. Such an impression is not only shared by investment professionals and financial advisors but also appears to be supported by an overwhelming amount of research in the academic literature. The benefits of adding real estate as an asset class to a well-diversified portfolio are usually attributed to the respectable risk-return profile of real estate investment together with the relatively low correlation between its returns and the returns of other financial assets. By using the regime-switching technique on an extensive historical dataset, we attempt to look for the statistical evidence for such a claim. Unfortunately, the empirical support for the claim is neither strong nor universal. We find that any statistically significant improvement in risk-adjusted return is very much limited to the bullish environment of the real estate market. In general, the diversification benefit is not found to be statistically significant unless investors are relatively risk averse. We also document a regime-switching behavior of real estate returns similar to those found in other financial assets. There are two distinct states of the real estate market. The low-return (high-return) state is characterized by its high (low) volatility and its high (low) correlations with the stock market returns. We find this kind of dynamic risk characteristics to play a crucial role in dictating the diversification benefit from real estate investment.

Cryptoassets have recently attracted the attention of national and international financial regulators. Since the mid-2010s blockchains have increasingly been adapted to automate and replace many aspects of financial intermediation, and by 2015 Ethereum had created the smart contract language that underpins the digitization of real assets as asset-backed tokens (ABTs). Those were initially issued by FinTech companies, but more recently banks active on international capital and financial markets, and even central banks, for example, the Bank of Thailand, have developed their own digital platforms and blockchains. A wide variety of real and financial assets underpins ABTs, viz., real-estate, art, corporate and sovereign bonds, and equity. Consequently, owing to the significant market capitalization of cryptocurrencies, the Basel Committee on Banking Supervision (BCBS) published two consultative papers delineating its approach on cryptoasset regulation. In this study, the authors analyze the mechanics of ABTs and their potential risks, relying on case studies of recent issuance of tokens in equity, real-estate, and debt markets, to highlight their main characteristics. The authors also investigate the consequences of the increasingly oligopolistic structure of blockchain mining pools and Bitcoin exchanges for the integrity and security of unregulated distributed ledgers. Finally, the authors analyze the BCBS’ regulatory proposals, and discuss the reaction of international financial institutions and cryptocurrency interest groups. The main findings are, firstly, that most ABTs are akin to asset-backed securities. Secondly, nearly all ABTs are “off-chain/on-chain,” that is, the underlying is a traditional asset that exists off-chain and is subsequently digitized. The main exception is the World Bank’s bond-i that is genuinely native to the blockchain created by the Commonwealth Bank of Australia, and has no existence outside it. Thirdly, all ABTs are issued on permissioned blockchains, where anti-money laundering/anti-terrorist funding and know-your-customer regulations are enforced. From a prudential regulatory perspective, ABTs do not appear to pose serious systemic risks to international financial markets. This may account for the often negative reactions of banks, banking associations, and cryptocurrency interest groups to the BCBS’ 2021 proposals for risk-weighted capital provisions for cryptoassets, which are viewed as excessive. Finally, we found that issuance of ABTS and other smart contracts on permissionless blockchains such as Bitcoin and Ethereum could potentially generate financial instability. A precedent involving Ethereum and The DAO in 2016 shows that (i) there is a significant accountability gap in permissionless blockchains, and (ii) the core developers of blockchains and smart contract technology, and Bitcoin mining pools, exercise an unexpectedly high- and completely unregulated-amount of power in what is supposedly a decentralized network.

Using harmonized wealth data and a novel decomposition approach in this literature, we show that cohort effects exist in the income profiles of asset and debt portfolios for a sample of European countries, the United States, and Canada. We find that the association between household wealth portfolios at the intensive margin (the level of assets) and household characteristics is different from that found at the extensive margin (the decision to own). Characteristics explain most of the cross-country differences in asset and debt levels, except for housing wealth, which displays large unexplained differences for both the under-50 and over-50 populations. However, there are cohort differences in the drivers of wealth levels. We observe that younger households’ levels of wealth, given participation, may be more responsive to the institutional setting than mature households. Our findings have important implications, indicating a scope for policies which can promote or redirect investment in housing for both cohorts and which promote optimal portfolio allocation for mature households.

The purpose of this chapter is to discuss the potential contribution of the option applications to economic instability. To this end, the chapter briefly reviews the extant literature on financial option pricing and its applications to corporate assets and liabilities. It focuses on the direct relationship between the volatility of the underlying asset and the value of the option. It shows that the theory of option applications by its one-sided emphasis on the value-creating role of volatility promotes excessive risk-taking. Then the chapter discusses how the theory of option applications through the educational system encourages economic agents to make excessively risky decisions. Furthermore, the interactions among these risk-welcoming agents lead to an economic system which becomes increasingly risky. This risky economy, combined with the fact that more than half of the value of the option applications is constituted by the highly volatile value of the options embedded in such applications, translates into wide variations in real investments and the economy.

It is fundamental to good governance that corporate decision makers be well informed, have the knowledge-base necessary to use the information effectively, and share the same motivations as the owners. Further, managers must provide owners with accurate, timely, and complete disclosure of the company's positions. Regarding the first part of the problem, value-based incentive systems have been under development in order to aid in resolving conflicts of interest between owners who lack the specific information (or the background knowledge to utilize it) and the managers who act as their agents. Such systems often focus exclusively upon cash flows relative to resource investment; yet, share values are often substantially greater than the amount that could be explained by expected cash flows from existing operations. Indeed, in some firms the majority of share value may derive from growth opportunities or other real options that add flexibility or reduce risk. So, value-based incentive systems could be improved by explicitly rewarding actions that create or enhance the firm's real options. Further, satisfactory disclosure requires that accounting reports include adequate information about the firm's real options, with market-based mechanisms for defining the necessary information and calling it into the appropriate arena.

This paper analyses the construction of value under the context of radical uncertainty (Keynes, 1936; Orléan, 1987) in the financialised real estate sector in France. It is based on a participant observation of valuation practices in an international real estate consulting firm and 26 in-depth interviews with professionals of the sector. We show that these practices rely on an institutional architecture that participates in the consolidation and legitimisation of the accumulation activity of asset managers and thus in the feeding of real estate bubbles in the hearts of large metropolises. Completing the conventionalist approach of value (Orléan, 2011) by focussing on the functioning of the organisations involved in the valuation process, I show that the determination of value is less the result of the emergence and autonomisation of a collective belief through market relationships than the product of power relationships between agents integrated in hierarchical professional organisations and in a specific legal framework.

We discuss recent developments in real options theory and its applications to strategic management research, examine the potential difficulties in implementing real options in theory and practice, and propose several areas for future research. Our review shows that real options theory has provided substantial insights into investment and exit decisions as well as into the choice of investment modes. In addition, extant research studies have contributed significantly to our understanding of whether and how organizations can benefit from real options. Future research that addresses difficulties in applications will further advance both real options theory and practice in strategic management. We call for future generations of research to enhance the impact of real options as an emerging dominant conceptual lens in strategic management.

We empirically investigate the hypothesis that the less transparent (more difficult to value) the target’s assets are the more likely it is that the acquiring firm can obtain higher short- and long-term returns. We analyze a sample of 1,538 friendly acquisitions partitioned in two separate dimensions: acquisitions of public versus private firms, and acquisitions of a firm’s assets versus acquisitions of a firm’s assets and its management. Using a sample of (nondiversifying) real estate transactions with a public REIT as the acquirer, we find that acquisitions of public firms have insignificant short-term abnormal returns. Acquisitions of private targets have positive and significant short-term abnormal returns. The acquirer’s abnormal returns are higher in both cases when the transactions involve acquisition of the target firm’s management. We find parallel results when analyzing the acquirer’s Q over the merger year and the three following years. Our conclusions are robust to the type of financing (cash, stock, or a combination) used in the acquisition.