China's transition to land and housing marketization in the 1980s and 1990s led to the fragmentation of housing property rights, separating land ownership from land-use rights and housing ownership from land-use rights. This has significant implications for the judicial auction of foreclosed housing, which is the mandatory procedure in China for handling debt-defaulted properties since 2016. The increasing number of foreclosed properties due to a sluggish real estate market and mounting debt crisis necessitates efficient judicial auctions to address bank debts and stabilize the housing financial system. Existing research primarily focuses on the pricing mechanism of foreclosed properties, emphasizing the stigma effect and high transaction costs that reduce buyer demand and depress prices. However, these studies neglect the substantial risks associated with the fragmented property rights inherent in the diverse types of housing in China (commercial housing, apartment housing, marketized housing, state-owned enterprise housing, relocation housing, economic affordable housing, illegal housing, and mall-property-rights housing). This study addresses this gap by analyzing how these fragmented rights create property-rights risks and impact auction outcomes. The research questions are: How do various configurations of property-rights risks impact the outcomes of foreclosure auctions? And what is the role of credible commitments from local courts in mitigating these risks?

Existing studies on foreclosed housing primarily focus on pricing mechanisms, highlighting the "stigma effect" – the depreciation of foreclosed properties due to perceived risks and ownership defects. Researchers emphasize the impact of high transaction costs and information asymmetry, which negatively influence buyer willingness to pay. Studies suggest that improving online information disclosure can mitigate the information asymmetry and improve auction success rates. However, a critical gap exists in understanding the role of fragmented property rights and their associated risks in influencing judicial auction outcomes. This study builds upon the existing literature by explicitly examining the impact of diverse and fragmented property rights structures on the success or failure of foreclosure auctions in China.

This study employs the comparative case study method using crisp-set Qualitative Comparative Analysis (cs-QCA). The dataset comprises 136 cases of foreclosed properties from online judicial auction platforms in 20 Chinese cities. Case selection adhered to strict criteria: properties located in main urban areas, comparable transaction prices to average second-hand property prices, clear auction outcomes (success or failure), and sufficient information to cover all variables. Data were collected from online auction platforms and supplemented by foreclosure due diligence reports obtained from a real estate agency. The outcome variable is whether the initial auction was successful (1) or failed (0). The explanatory variables encompass three types of property-rights risks: * **Cost risk:** Determined by land status (leased, allocated, or illegal) and disclosure of transaction costs (hidden taxes, fees). * **Acquisition risk:** Determined by the integrity of property rights (IPR), reflecting the clarity and completeness of ownership rights across different housing types. * **Usufruct risk:** Determined by the discretion of property rights (DPR), indicating the extent to which buyers can exercise usufructuary rights (habitation, disposal, inheritance). A moderating variable, credible commitments (CC) from the courts, is also included, reflecting the court's commitment to resolving issues related to property rights. Cs-QCA was chosen due to its suitability for analyzing complex causal relationships with multiple factors and a binary outcome variable. The analysis involved necessity and sufficiency analyses to identify necessary and sufficient conditions for successful auctions.

The cs-QCA analysis revealed that no single variable was a necessary or sufficient condition for a successful auction. Instead, the success of foreclosure auctions depended on specific configurations of multiple variables. Key findings include: 1. **Leased land-use rights and higher transparency of transaction costs (DTC) facilitate successful auctions.** Higher DTC reduces information asymmetry and mitigates cost risks. Even with weaker IPR or DPR, leased land-use rights increase the likelihood of success. 2. **Higher integrity of property rights (IPR) and discretion of property rights (DPR) are crucial for successful auctions.** Properties with clearer ownership (high IPR) and fewer restrictions on usage (high DPR), such as commercial and apartment housing, are more likely to be successfully auctioned. 3. **Credible commitments (CC) from the courts are vital in mitigating property-rights risks.** When DTC, IPR, or DPR are weaker, court commitments to resolve issues, such as removing illegal occupants, significantly improve auction success rates. 4. **Heterogeneity analysis based on land status reveals distinct patterns.** For properties with leased land-use rights, higher DTC is most impactful. For properties with non-leased land-use rights (including small property rights housing and illegal housing), credible commitments from the court are particularly crucial. Successful transactions frequently rely on credible commitments from the court to rectify property rights issues and mitigate the risks of these transactions. These commitments act to legitimize otherwise questionable property rights. The court's issuance of legal certificates confirming the transaction enhances buyer confidence and facilitates successful auctions.

The findings highlight the significant impact of fragmented property rights on the efficiency of judicial auctions in China's housing market. The study demonstrates the complexity of factors influencing auction success, moving beyond simple correlations to identify specific configurations of conditions that lead to successful outcomes. The crucial role of court commitments in mitigating risks underscores the importance of strong institutional support in addressing the challenges posed by fragmented property rights. The results have significant implications for policymakers, suggesting that improving transparency, simplifying procedures, and strengthening court-bank coordination are essential for improving the efficiency and fairness of judicial auctions. Furthermore, the heterogeneity analysis reveals the need for targeted policies to address the specific challenges associated with different types of housing and land-use rights.

This study contributes to a better understanding of the complexities involved in judicial auctions of foreclosed properties in China. The findings emphasize the interplay between fragmented property rights, property-rights risks, and court commitments in shaping auction outcomes. Policy recommendations include enhancing transparency and information disclosure, streamlining procedures, strengthening court-bank coordination, and promoting buyer education. Future research could explore the effectiveness of specific policy interventions in different regional contexts and investigate the long-term impact of these policies on market stability and debt resolution.

The study is limited to a specific set of cases and may not be fully generalizable to all regions of China. The data reliance on online platforms may introduce biases in the data. Future studies can use a larger, more diverse data set to improve the generalizability of the findings. Additionally, exploring the subjective perceptions of buyers toward property-rights risks can provide further insights.