||This paper investigates whether the bidding induces the occurrence of herding, and analyses the effects of behavioral factors, information, and fundamental characteristics of real estate on the performance of bank auction. Our sample is from July 2001 to January 2003, the real estate that intermediaries sold was held by bank in Taiwan, including 363 the real estate and the price of bidding under bank auction. We obtain some interesting implication. First of all, we find that herding of bidding not only could explain premium but also discount. After controlling informational factors and fundamental characteristics of real estate, it could not weaken the significance of herding of bidding. For the strategy of the reserve price by the vendor, the higher discount is to encourage bidding actively, which is consistent with the view of Welch (1992). Secondly, we find bidders could easily reduce search cost by observing the bidding of competitors under bank auction, and herding of bidding on the auction process could enhance efficiency of information aggregation. Furthermore, herding of bidding makes the performance of auction different between court and bank. Finally, we overcome the selective bias and find the real estate held by bank had poor performance under court auction; however, the real estate held by court had better performance under bank auction. This implies the mechanism of court auction should be transformed into the open-outcry bidding in order to achieve effective recovery of debt and the policy of reducing losses.|
Robustness analysis of this study, first of all, for the herd measure that not isolated from informational factors, we find the insignificant effect of behavioral factors on the performance of English mechanism, and auction premium and discount are dominated by the informational factors. Secondly, the choice of the methods about true value of real estate may affect the conditional probability of the herd measure, and make inconsistent conclusions that the effect of behavioral factors on the performance of English mechanism. Whether we choose cluster analysis or regression method to obtain the true value of real estate, the conclusion that the effect of behavioral factors on the performance of English mechanism could be supported, and those can not switch the results of the minimum sum method. Thus, the conclusion that behavioral factors influence the performance of the auction is full of evidences.