Absolute blockchain strength? Evidence from the ABS market in China


Blockchain, a type of distributed ledger technology, has become a buzzword in the past decade. Its potential to challenge current business practises, such as financial transactions, has been touted or criticised by numerous researchers and practitioners. Nonetheless, academic literature thus far has provided little empirical evidence on how financial services benefit from such new technology. We exploit the emerging asset-backed security (ABS) market in China and its rapid adoption of blockchain technology. We examine whether blockchain-based ABS products enjoy better pricing than those not based on blockchain after controlling potential endogeneity with coarsened exact matching. Analysing approximately 5,000 ABS products issued between 2015 and 2020, we show that the adoption of blockchain technology indeed reduces the yield spread by approximately 25 basis points and that this benefit is heterogeneous across the different underlying asset classes and institutional arrangements. Interestingly, we find that social factors such as familiarity among key ABS parties may increase or decrease the benefit of adopting blockchain in ABS products depending on the asset classes and regulatory environments. Our study makes a timely contribution to the debate surrounding blockchain technology and its implications for the financial sector.


About the speaker

Dr. Yanfeng Zheng is Associate Professor in the Department of Management at the Hong Kong University of Science and Technology (HKUST). He earned his Ph.D. from the University of Wisconsin-Madison in 2006, having majored in management and minored in economics. His research interests primarily revolve around the nexus of strategic management and entrepreneurship. His work has been published at leading management and entrepreneurship journals such as AMJ, SMJ, JBV, JMS, ICC, and SEJ. He also serves the editorial board of AMJ since 2013, the most prestigious academic journal in the management field, and won the Best Reviewer Award in 2014 and 2016. He was the recipient of the Irene M. McCarthy Award for the best paper on the topic of High technology and Innovation at the Babson International Entrepreneurship Conference. Dr. Zheng has won several major research grants such as General Research Funding (GRF) of Hong Kong. He also has extensive teaching experience in entrepreneurship and strategic management. He has developed a few innovative teaching methods and novel courses such as Fintech Entrepreneurship.



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