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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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Do housing booms reduce fertility intentions? Evidence from the new two-child policy in China
Lina Meng,Lü Peng,Yinggang Zhou +2 more
TL;DR: Wang et al. as discussed by the authors found that a one standard deviation increase in the housing price-income ratio decreases the probability of migrant couples' intention to have a second child by 7.69%, with the effect being concentrated on renters.
Journal ArticleDOI
Corporate pledgeable asset ownership and stock price crash risk
TL;DR: In this article , the authors investigate how a firm's corporate pledgeable asset ownership (CPAO) affects the risk of future stock price crashes and provide novel empirical evidence that a firm’s risk of a future stock market crash decreases with an increase in its pledgeable assets.
Journal ArticleDOI
Financial reporting consequences of natural disasters: Evidence from the impact of resource constraints at audit offices on non-affected clients
TL;DR: In this paper , the authors examined the financial reporting consequences of natural disasters, focusing on the externality of disasters on companies not directly affected by disasters and found that disaster-affected clients demand significant additional effort from their audit office, and hence strain the audit office's resources available to other non-disaster affected clients.
DissertationDOI
Firm heterogeneity and the macroeconomy
TL;DR: In this article, the authors investigate the US labor market implications of a drop in the number of new firms, study the cyclical effects on productivity due to limits in the reallocation of capital across firms, and quantify the effectiveness of a policy which attempted to save jobs in Germany by altering firm incentives for lay-offs.
Does Housing Boom Boost Corporate Financialization?—Evidence from China
TL;DR: In this paper , the authors investigate the linkage between house prices and corporate financialization and find that the deterring effect is stronger for firms with high cash holdings and is primarily driven by manufacturing 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.
Journal ArticleDOI
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.
Journal ArticleDOI
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.
Journal ArticleDOI
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.