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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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Book ChapterDOI
Endogeneity in Empirical Corporate Finance1
Michael Roberts,Toni M. Whited +1 more
TL;DR: In this paper, applied researchers in corporate finance can address endogeneity concerns, including omitted variables, simultaneity, and measurement error, and discuss a number of econometric techniques aimed at addressing endogeneity problems, including instrumental variables, difference-in-differences estimators, regression discontinuity design, matching methods, panel data methods, and higher order moments estimators.
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Atif Mian,Amir Sufi,Amir Sufi +2 more
TL;DR: This article showed that borrowing against the increase in home equity by existing homeowners is responsible for a significant fraction of both the rise in U.S. household leverage from 2002 to 2006 and increase in defaults from 2006 to 2008.
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Credit Supply and Monetary Policy: Identifying the Bank Balance-Sheet Channel with Loan Applications
TL;DR: In this paper, the impact of monetary policy on the supply of bank credit is analyzed and the authors find that tighter monetary and worse economic conditions substantially reduce loan granting, especially from banks with lower capital or liquidity ratios.
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The productivity advantages of large cities: distinguishing agglomeration from firm selection
TL;DR: In this paper, a generalised version of a tractable firm selection model and a standard model of agglomeration were used to show that firm selection cannot explain spatial productivity differences.
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Economic policy uncertainty and corporate investment: Evidence from China
TL;DR: This article studied how economic policy uncertainty influences corporate investment for Chinese listed companies and showed that firms with higher return on invested capital, use more internal finance and are not state-owned mitigate the negative effect of policy uncertainty on corporate investment.
References
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Journal ArticleDOI
House Prices, Home Equity-Based Borrowing, and the U.S. Household Leverage Crisis
Atif Mian,Amir Sufi,Amir Sufi +2 more
TL;DR: This article showed that borrowing against the increase in home equity by existing homeowners is responsible for a significant fraction of both the rise in U.S. household leverage from 2002 to 2006 and increase in defaults from 2006 to 2008.
Journal ArticleDOI
Adjustment Costs and the Theory of Supply
TL;DR: In this paper, the relative fixity of capital is introduced explicitly into the formulation of the firm's maximum problem and used this formulation to obtain a precise definition of the industry's "short run" and "long run" equilibrium posi-
Posted Content
A Unified Model of Investment Under Uncertainty
TL;DR: In this article, the authors extend the theory of investment under uncertainty to incorporate fixed costs of investment, a wedge between the purchase price and sale price of capital, and potential irreversibility of investment.
Posted Content
Private and Public Supply of Liquidity
Bengt Holmstrom,Jean Tirole +1 more
TL;DR: In this article, the authors address a basic, yet unresolved question: Do claims on private assets provide sufficient liquidity for an efficient functioning of the productive sector? Or does the State have a role in creating liquidity and regulating it either through adjustments in the stock of government securities or by other means?
Journal ArticleDOI
Investment and Financing Constraints: Evidence from the Funding of Corporate Pension Plans
TL;DR: In this article, the authors exploit sharply nonlinear funding rules for defined benefit pension plans in order to identify the dependence of corporate investment on internal financial resources in a large sample, showing that capital expenditures decline with mandatory contributions to defined benefit pensions, even when controlling for correlations between the pension funding status itself and the firm's unobserved investment opportunities.