Product market effects of real estate collateral
Journal of Corporate Finance, 2016, vol. 36, issue C, pages 75-92
This paper exploits shocks to the value of real estate collateral to study how exogenous changes in firms' external financing capacity affect their competitive performance and industry dynamics. Firms with appreciating collateral tend to gain market share relative to their product market rivals. Shocks to collateral lead to less competitive product markets. The effects of collateral are stronger in markets where firms compete in strategic substitutes or face competitors with restricted access to external financing, and when real estate prices are instrumented with the interaction between housing supply constraints and mortgage rates. These results highlight the strategic importance of collateral.
Keywords: Product market competition; Collateral; Financing capacity; Performance (search for similar items in EconPapers)
JEL-codes: G31 G32 G34 L11 (search for similar items in EconPapers)
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Persistent link: http://EconPapers.repec.org/RePEc:eee:corfin:v:36:y:2016:i:c:p:75-92
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