Real Estate Prices and Corporate Investment: Theory and Evidence of Heterogeneous Effects across Firms - Aix-Marseille Université Access content directly
Journal Articles Journal of Money, Credit and Banking Year : 2019

Real Estate Prices and Corporate Investment: Theory and Evidence of Heterogeneous Effects across Firms

Rémy Lecat
  • Function : Author
  • PersonId : 902184
Simon Ray
  • Function : Author
  • PersonId : 959565

Abstract

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.
Fichier principal
Vignette du fichier
2017-fougere-real-estate-prices-and-corporate-investment.pdf (2.33 Mo) Télécharger le fichier
Origin : Publication funded by an institution
Loading...

Dates and versions

hal-02274289 , version 1 (12-03-2020)

Identifiers

Cite

Denis Fougère, Rémy Lecat, Simon Ray. Real Estate Prices and Corporate Investment: Theory and Evidence of Heterogeneous Effects across Firms. Journal of Money, Credit and Banking, 2019, 51 (6), pp.1503-1546. ⟨10.1111/jmcb.12631⟩. ⟨hal-02274289⟩
79 View
197 Download

Altmetric

Share

Gmail Facebook Twitter LinkedIn More