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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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The Effect of Collateral Shocks in the Context of Labor Market Frictions
TL;DR: In this article, the authors calibrate a model to explore the impact of collateral shocks on real firm behavior and find that a negative shock to the collateral value depresses the business activities by tightening the borrowing capacity.
Journal ArticleDOI
The collateral composition channel
Frédéric Boissay,Russell Cooper +1 more
TL;DR: The use of inside collateral creates a "collateral pyramid": cash flows from one loan are pledged to secure another as discussed by the authors, and the use of outside collateral such as treasuries stabilizes the pyramid.
Journal ArticleDOI
Deconstructing involuntary financial exclusion: a focus on African SMEs
TL;DR: In the context of Africa, the financial markets have gaping institutional voids, and contextual insights into SMEs' experiences remain underdeveloped as mentioned in this paper , and the scholarly conversation by theorising about how collateral security, collateral security value and the gender of SME owners lead to the involuntary financial exclusion of many manufacturing businesses in Africa.
Posted Content
Heterogeneous Tax Sensitivity of Firm-level Investments
TL;DR: In this paper, a stylized theoretical framework is introduced to account for the differences in size, productivity, ownership concentration, governance, financial structure and other dimensions of firms and explain the heterogeneous tax sensitivity of firm-level investments across firm types.
Dissertation
What happens to firm performance and financing when bank branches close
TL;DR: In this article, the authors present a Table of Table of contents of a table of tables: https://www.tableoffeatures.com/table-of-pages/table.
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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.