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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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Low Access to Credit Decreases Asset Prices - Evidence from a Quasi-Experiment in Agriculture
Chenguang Wang,David B. Oppedahl +1 more
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A shot in the arm: Economic support packages and firm performance during COVID-19
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The Economic Costs of Financial Distress
Claudia Custodio,Claudia Custodio,Miguel A. Ferreira,Miguel A. Ferreira,Emilia Garcia-Appendini +4 more
TL;DR: In this paper, the authors estimate the economic costs of financial distress by exploiting cross-supplier variation in real estate assets and leverage, and the timing of real estate shocks and show that for the same client buying from different suppliers, its purchases from distressed suppliers decline by an additional 10% following a drop in real-estate prices.
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Collateral Value and Entrepreneurship: Evidence from a Property Tax Reform
TL;DR: In this paper, the authors study the role of property taxes on entrepreneurial activity using a quasi-natural experiment, which unexpectedly reduced the upper bound of the Portuguese property tax rate for urban properties in 2008.
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Do Green Finance Policies Foster Environmental, Social, and Governance Performance of Corporate?
TL;DR: Wang et al. as mentioned in this paper investigated the impact of green finance policies on corporate environmental, social, and governance performance by using a continuous Difference-in-Differences (DID) model based on the data of listed companies from 2006 to 2020.
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.