Biqin Xie

Portrait of Biqin Xie Assistant Professor of Accounting
374 Business Building
University Park, PA 16802
814-865-0572

bxx5@psu.edu

Publications

Asset-level Transparency and the (E)valuation of Asset-Backed Securities (with Jed Neilson, Stephen Ryan, and Philip Wang), Journal of Accounting Research, 2022, 60 (3): 1131–1183.

As of November 2016, SEC Regulation (“Reg”) AB II requires issuers of certain types of asset-backed securities (“ABS”) to disclose the credit-risk attributes of each asset in the underlying pool, a substantial expansion of prior disclosure requirements. We examine how ABS issuers’ asset-level disclosures under Reg AB II affect the (e)valuation of ABS by investors and credit rating agencies. Using difference-in-differences models that compare affected and unaffected types of ABS, we find that these disclosures improve the ability of initial ABS yields and credit ratings to predict the performance of the underlying assets. These results are concentrated in deals with above-median risk layering in the underlying assets and complexity in the tranching of credit risk. We further find that asset-level disclosures are associated with lower yields. Lastly, we provide evidence that most prospective ABS investors download asset-level information during the price formation period prior to ABS issuance.

Does Fair Value Accounting Exacerbate the Pro-cyclicality of Bank Lending? Journal of Accounting Research, 2016, 54(1), 235-274 (sole-authored; based on dissertation).

This study investigates whether fair value accounting contributes to the procyclicality of bank lending. Using banks’ approval/denial decisions on residential mortgage applications to capture banks’ supply of credit, I find no evidence that fair value accounting has procyclical effects on bank lending over the past two business cycles. I further identify two reasons for this result. First, the main accounting item distinguishing fair value accounting from historical cost accounting—unrealized gains and losses on available-for-sale securities—does not affect lending decisions. Second, unrealized gains and losses on available-for-sale securities are not procyclical, as the risk-free interest rate rises during some expansionary periods, resulting in unrealized losses, while the risk-free interest rate (and sometimes the default spread) falls during some recessionary periods, resulting in unrealized gains.

The Real Effects of FAS 166/167 on Banks’ Mortgage Approval and Sale Decisions, Journal of Accounting Research, 2018, 56 (3), 843–882 (with Yiwei Dou and Stephen Ryan).

We examine the real effects of FAS 166 and FAS 167 on banks’ loan-level mortgage approval and sale decisions. Effective in 2010, these standards tightened the accounting for securitizations and consolidation of securitization entities, respectively, causing banks to recognize an estimated $811 billion of securitized assets on balance sheet. We find that banks that recognize more securitized assets exhibit larger decreases in mortgage approval rates and larger increases in mortgage sale rates. These effects significantly exceed those of banks’ off-balance sheet securitized assets, consistent with our results being driven by the consolidation of securitization entities rather than by securitization per se. We conduct tests that help rule out the financial crisis as an alternative explanation for our results. Further analyses suggest that mechanisms underlying the results include consolidating banks’ reduced regulatory capital adequacy, increased market discipline, and consequent desire not to recognize high-risk mortgages on balance sheet.

The “Out-of-sample” Performance of Long-Run Risk Models”, Journal of Financial Economics, 2013, 107 (3), 537-556 (with Wayne Ferson and Suresh Nallareddy).

This paper studies the ability of long-run risk models to explain out-of-sample asset returns during 1931–2009. The long-run risk models perform relatively well on the momentum effect. A cointegrated version of the model outperforms the classical, stationary version. Both the long-run and the short-run consumption shocks in the models are empirically important for the models’ performance. The models’ average pricing errors are especially small in the decades from the 1950s to the 1990s. When we restrict the risk premiums to identify structural parameters, this results in larger average pricing errors but often smaller error variances. The mean squared errors are not substantially better than those of the classical CAPM, except for Momentum.

Working Papers

Offsetable Derivative Exposures and Investor Risk Assessment (with Jed Neilson, Philip Wang, and Chris Williams), R & R at Management Science.

The Use of Cash Flows in Setting Executive Compensation and the Cost of Bank Loans (with Guojin Gong and Daniel X. Jiang), R & R at Contemporary Accounting Research.

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