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The Collateral Channel: How Real Estate Shocks Affect Corporate Investment
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In this article, the impact of real estate prices on corporate investment was studied and the sensitivity of investment to real estate values was found to be a function of local variations in real estate price as shocks to the collateral value of firms that own real estate.Abstract:
What is the impact of real estate prices on corporate investment? In the presence of financing frictions, firms use pledgeable assets as collateral to finance new projects. Through this collateral channel, shocks to the value of real estate can have a large impact on aggregate investment. To compute the sensitivity of investment to collateral value, we use local variations in real estate prices as shocks to the collateral value of firms that own real estate. Over the 1993-2007 period, the representative US corporation invests $0.06 out of each $1 of collateral.read more
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Do demand or supply factors drive bank credit,in good and crisis times?
Gabriel Jiménez,Steven Ongena,José-Luis Peydró,José-Luis Peydró,José-Luis Peydró,Jesús Saurina +5 more
TL;DR: In this article, the impact of balance-sheet strength on credit availability is analyzed, showing that bank balance sheets are weak in crisis times, but so are those of firms, and credit demand is then also weak.
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Central Bank Liquidity Provision and Collateral Quality
TL;DR: This paper showed that a fall in the quantity or quality of the bank's collateral can increase interest rates in the economy even with a constant policy rate, and that a looser central bank collateral policy can reduce the spread, alleviate the credit crunch and increase output.
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Financial Flexibility and Manager–Shareholder Conflict: Evidence from REITs
Timothy J. Riddiough,Eva Steiner +1 more
TL;DR: In this paper, the use of unsecured debt, which contains standardized covenants that place limits on total leverage and use of secured debt, is associated with lower leverage outcomes and the firm value is sensitive to leverage levels.
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Cash Windfalls and Acquisitions
TL;DR: In this paper, the effect of cash windfalls on the acquisition policy of companies was studied. And they found that companies that could realize a cash windfall by selling equity stakes see an increase in the probability of acquiring another company by 14%.
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Regional Data in Macroeconomics: Some Advice for Practitioners
TL;DR: In this article, the authors cast regional analysis in a potential outcomes framework, and provided several pieces of advice for practitioners in this literature, including the choice of endogenous variable in a regional regression and whether or not to weight by population.
References
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Credit Rationing in Markets with Imperfect Information.
Joseph E. Stiglitz,Andrew Weiss +1 more
TL;DR: In this paper, a model is developed to provide the first theoretical justification for true credit rationing in a loan market, where the amount of the loan and amount of collateral demanded affect the behavior and distribution of borrowers, and interest rates serve as screening devices for evaluating risk.
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How Much Should We Trust Differences-In-Differences Estimates?
TL;DR: In this article, the authors randomly generate placebo laws in state-level data on female wages from the Current Population Survey and use OLS to compute the DD estimate of its "effect" as well as the standard error of this estimate.
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Do Investment-Cash Flow Sensitivities Provide Useful Measures of Financing Constraints?
Steven N. Kaplan,Luigi Zingales +1 more
TL;DR: In this article, the authors investigated the relationship between financing constraints and investment-cash flow sensitivities by analyzing the firms identified by Fazzari, Hubbard, and Petersen as having unusually high investment cash flow sensitivity.
Posted Content
Agency Costs, Net Worth, And Business Fluctuations
Ben S. Bernanke,Mark Gertler +1 more
TL;DR: The authors constructs a simple neoclassical model of intrinsic business cycle dynamics in which borrowers' balance sheet positions play an important role and shows that the agency costs of undertaking physical investments are inversely related to the entrepreneur's/borrower's net worth.
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Tobin's Marginal q and Average q : A Neoclassical Interpretation
TL;DR: In this paper, the optimal rate of investment as a function of marginal q adjusted for tax parameters is derived from data on average q assuming the actual U.S. tax system concerning corporate tax rate and depreciation allowances.