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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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Risk Management in Financial Institutions
TL;DR: This article studied risk management in financial institutions using data on hedging of interest rate risk by banks and bank holding companies and found strong evidence that better capitalized institutions hedge more both in the cross-section and within institutions over time.
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Housing price appreciation, investment opportunity, and firm innovation: Evidence from China
TL;DR: In this article, the authors examined the impact of housing price appreciation on firm innovation and found that the negative effect was more pronounced where housing price growth rates were higher, and they further explored the underlying mechanism by examining the likelihood of listed firms' diversification into the real estate industry and how the diversification influenced their patenting.
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Credit Supply versus Demand : Bank and Firm Balance-Sheet Channels in Good and Crisis Times
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A Bayesian dynamic stochastic general equilibrium model of stock market bubbles and business cycles
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Financial Constraints and Corporate Environmental Policies
Qiping Xu,Taehyun Kim +1 more
TL;DR: This paper found that financial constraints increase firms' toxic emissions given that firms actively trade off abatement costs against potential legal liabilities, and the effects of financial constraints on toxic releases are amplified when regulatory enforcement weakens and when myopic managers emphasize short-term earnings performance.
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.