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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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Reconnecting Investment to Stock Markets: The Role of Corporate Net Worth Evaluation
TL;DR: In this paper, a stock market mechanism is incorporated in a general equilibrium framework, and an endogenous wedge between market and book value of capital is introduced, and investment is made a function of it in a standard financial accelerator model.
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Credit Rationing and Firm Exports: Micro Evidence from SMEs in China
Dong Cheng,Yong Tan,Jian Yu +2 more
TL;DR: In this paper, the authors examined the effect of credit rationing on export performance for small and medium sized firms in China using a detailed firm-level data provided by the Small and Medium-sized Enterprises Dynamic Survey (SMEDS).
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Equity market response to natural disasters: Does firm's corporate social responsibility make difference?
TL;DR: In this paper , the role of corporate social responsibility (CSR) in explaining firms' stock performance in the wake of natural disasters in the United States was investigated using event study and multivariate regression analyses, and they found that market performance of CSR firms is better than that of non-CSR firms when such disasters occur.
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미국 경제구조 변화에 따른 성장 지속가능성 점검 및 시사점 (Structural Changes of the U.S. Economy and Its Implication on the U.S. Mid-To-Long Term Growth Path and the Korean Economy)
TL;DR: In this article, the authors examined the implications of US economic recovery and mid- to long-term growth on Korea and found that after the financial crisis, the US economy is recovering faster than other developed countries such as Japan and Europe.
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Bank lending behavior and housing market booms: The Australian evidence
TL;DR: In this paper , the authors studied the Australian economy with its unique banking industry and sustained housing market boom and found evidence of crowding out of business loans towards housing loans in response to increased opportunities in strong housing markets, which in turn curtails business investment.
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.