Open AccessThe Collateral Channel: How Real Estate Shocks Affect Corporate Investment
Author(s) -
Thomas Chaney,
David Sraer,
David Thesmar
Publication year - 2012
Publication title -
american economic review
Language(s) - English
Resource type - Journals
SCImago Journal Rank - 16.936
H-Index - 297
eISSN - 1944-7981
pISSN - 0002-8282
DOI - 10.1257/aer.102.6.2381
Subject(s) - collateral , real estate , investment (military) , economics , monetary economics , capitalization rate , finance , value (mathematics) , real estate investment trust , business , financial economics , machine learning , politics , computer science , political science , law
International audienceWhat 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
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