Real Estate Prices and Corporate Investment: Theory and Evidence of Heterogeneous Effects across Firms
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- ISIDORE Id: 10670/1.7c52be...
- hal: hal-02274289
- doi: 10.1111/jmcb.12631
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info:eu-repo/semantics/altIdentifier/doi/10.1111/jmcb.12631
info:eu-repo/semantics/OpenAccess
Mots-clés
financial constraints Firms' investment Real estate prices Collateral channel Financial constraints JEL classification: D22 G30 O52 R30Sujets proches
Real property--Law and legislation Catastral surveys Real estate law Cadastral surveys Realty Property, Real Freehold Real estate Limitations (Law)Citer ce document
Denis Fougère et al., « Real Estate Prices and Corporate Investment: Theory and Evidence of Heterogeneous Effects across Firms », HAL SHS (Sciences de l’Homme et de la Société), ID : 10.1111/jmcb.12631
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Résumé
In this paper, we investigate the effect of real estate prices on productive investment. We build a theoretical framework of firms' investment with credit rationing and real estate collateral. We show that real estate prices affect firms' borrowing capacities through two channels. An increase in real estate prices raises the value of the firms' pledgeable assets and mitigates the agency problem characterizing the creditor–entrepreneur relationship. It simultaneously cuts the expected profit due to the increase in the cost of inputs. We test our theoretical predictions using a large French database. We do find heterogeneous effects of real estate prices on productive investment depending on the position of the firms in the sectoral distributions of real estate holdings.
