Publication Type
Journal Article
Version
submittedVersion
Publication Date
1-2024
Abstract
In this paper, we evaluate the economic value of a blockchain application. In the context of asset-backed securities (ABS) issuance in China, where some ABS are issued with blockchain technology and others are not, we find that the use of blockchain significantly reduces the coupon yield at issuance. Compared with other ABS, those issued using blockchain technology experience a decrease of 31.4 basis points in the yield spread, which corresponds to a relative decrease of 13%. We further document that the effect of blockchain is more pronounced for ABS deals rated by less reputable credit rating agencies and agencies that rely more on issuers for their rating business, for revolving ABS, and for ABS with a larger number of underlying assets. We also find that the use of blockchain can reduce the level of retained interest and number of credit enhancement mechanisms. This paper contributes to the literature by providing a small-sample analysis of the economic value of a blockchain application in financial markets.
Keywords
Blockchain, Asset-Backed Securities, Information Asymmetry
Discipline
Accounting | Portfolio and Security Analysis
Research Areas
Corporate Reporting and Disclosure
Publication
Management Science
Volume
70
Issue
1
First Page
439
Last Page
463
ISSN
0025-1909
Identifier
10.1287/mnsc.2023.4671
Publisher
Institute for Operations Research and Management Sciences
Citation
CHEN, Xia; CHENG, Qiang; and LUO, Ting.
The economic value of blockchain applications: Early evidence from asset-backed securities. (2024). Management Science. 70, (1), 439-463.
Available at: https://ink.library.smu.edu.sg/soa_research/1968
Copyright Owner and License
Authors
Creative Commons License
This work is licensed under a Creative Commons Attribution-NonCommercial-No Derivative Works 4.0 International License.
Additional URL
https://doi.org/10.1287/mnsc.2023.4671