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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
Citations
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Employment and the Residential Collateral Channel of Monetary Policy
TL;DR: This article found that younger, more-levered firms exposed to collateral fluctuations drive the employment response to monetary policy, showing a residential collateral channel in the transmission of monetary policy to firms.
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Fragile New Economy: The Rise of Intangible Capital and Financial Instability
TL;DR: In this article, a dynamic general equilibrium model is proposed to explain the secular upward trends in corporate liquidity holding and financial-sector risk-taking in the past few decades, where the structural transformation to an intangible-intensive "new economy" results in increased corporate liquidity demand.
National and International Business Cycles : the Role of Financial Frictions and Shocks
TL;DR: In this paper, the authors investigated the role of financial frictions in amplifying the impacts of productivity shocks using a framework in which a fraction of firms are borrowing-constrained and land is a collateral asset.
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Payout Policy and Real Estate Prices
Anil Kumar,Carles Vergara-Alert +1 more
TL;DR: In this article, the authors studied the impact of real estate prices on the payout policy of firms and found that firms that experience positive shocks to the value of their CRE assets smooth their dividends more and increase their probability of paying dividends.
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Sectoral Booms and Misallocation of Managerial Talent: Evidence from the Chinese Real Estate Boom
TL;DR: In this article, the authors argue that imperfections in the financial market and capital barriers to entry in the booming sector create a misallocation of managerial talent, leading to inefficiency in capital reallocation at the extensive margin.
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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