Collateral Shocks and Corporate Employment*

House prices, collateral, and self-employment

Nuri Ersahin and Rustom M Irani

Review of Finance, 2020, vol. 24, issue 1, 163-187

Abstract: We analyze how firm-level shocks to collateral values influence employment outcomes among US corporations. Using comprehensive employment data from the US Census Bureau, we estimate that employment expenditures increase by $0.10 per $1 increase in firms’ real estate collateral values. These effects are stronger among financially constrained firms, and additional hiring is funded through debt issuance, consistent with a collateral channel. This relation holds among firms in tradable goods sectors, alleviating concerns about local demand shocks. Thus, through a collateral lending channel, fluctuations in the US commercial real estate market are an important driver of corporate labor demand.

Keywords: Credit constraints; Collateral lending channel; Employment; Real estate (search for similar items in EconPapers)
JEL-codes: E44 G31 G32 (search for similar items in EconPapers)
Date: 2020
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Citations: View citations in EconPapers (9)

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