Developers’ Leverage, Capital Market Financing, and Fire Sale Externalities: Evidence from the Thai Condominium Market

Leveraged developers facing rollover risk are more likely to engage in fire sales. Using COVID-19 as a natural experiment, we find evidence of fire sale externalities in the Thai condominium market. Resales in properties whose developers have higher leverage ratios have lower listing prices for listed developers (who have access to capital market financing) but not unlisted developers (who primarily use bank financing). We attribute this difference to the flexibility of bank loan renegotiation versus the rigidity of debt capital market repayments and highlight the role of commercial banks in financial intermediation in the presence of information asymmetry.