Corporate Governance and Collateral Effect of Real Estate

Daxuan Zhao ()
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Daxuan Zhao: Renmin University of China

International Real Estate Review, 2024, vol. 27, issue 1, 117-138

Abstract: The collateral channel literature predicts that soaring real estate prices increase the debt capacity of firms with more real estate asset holdings. This paper discusses the different relationships between collateral and investment. We find that firms with strong corporate governance were more likely to increase debt capacity via the collateral channel during the real estate boom from 1993 to 2006. Entrenched managers used less debt to finance their investments when their real estate collateral values increased. Our results hold even after controlling for non-collateralized debts and credit rating of the sample firms.

Keywords: Collateral Effect; Corporate Governance; G-Index; Real Estate Assets; Investment Decisions (search for similar items in EconPapers)
Date: 2024
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