The collateral channel: How real estate shocks affect corporate investment

Author(s): Chaney, T; Sraer, David; Thesmar, D

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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.
Publication Date:	Oct-2012
Citation:	Chaney, T, Sraer, D, Thesmar, D. (2012). The collateral channel: How real estate shocks affect corporate investment. American Economic Review, 102 (6), 2381 - 2409. doi:10.1257/aer.102.6.2381
DOI:	doi:10.1257/aer.102.6.2381
ISSN:	0002-8282
Pages:	2381 - 2409
Type of Material:	Journal Article
Journal/Proceeding Title:	American Economic Review
Version:	Final published version. Article is made available in OAR by the publisher's permission or policy.