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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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Does environmental regulation affect the labor income share of manufacturing enterprises? Evidence from China
TL;DR: In this article , the effects of environmental regulation on labor income share using a difference-in-differences model was examined based on a quasi-natural experiment of the new Environmental Protection Law.
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Local Banks, Credit Supply, and House Prices
TL;DR: This article studied the effect of an increase in the supply of local mortgage credit on local house prices and employment by exploiting a natural experiment from Switzerland, where losses in U.S. security holdings triggered a migration of dissatis?ed retail customers from a large, universal bank (UBS) to homogenous local mortgage lenders.
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Collateral and Small Firm Labor
TL;DR: In this paper, the authors used UK firm level data on real estate holdings and cross-sectional differences in house price growth to find that the average small business extracts $0.20 out of every dollar increase in their real estate value.
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Housing price and enterprise financing: does mortgage effect exist?
Shujing Li,Nan Gao +1 more
TL;DR: In this paper, the authors explore the influence of the rise in housing prices on enterprise financing and also the sustainability and heterogeneity of this effect, which reveals the risk and bubble in the effect of house market on enterprise finance, and enlightens how to promote financing ability of company.
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Collateral, Risk, and Borrowing Capacity
TL;DR: The authors examined the effect of risk-shifting incentives on the relation between collateral and corporate borrowing capacity and found that gold firms have more borrowing capacity with credit lines during the crisis than non-gold firms.
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.
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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.