Collateral Value and Corporate Investment: Evidence from the French Real Estate Market

Thomas Chaney, D. Sraer and D.thesmar
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D. Sraer: Insee
D.thesmar: HEC and CEPR

Documents de Travail de l'Insee - INSEE Working Papers from Institut National de la Statistique et des Etudes Economiques

Abstract: This paper is an empirical study of the effect of shocks to firms' collateral, with a focus on land holdings. We find evidence that stand-alone French firms are credit constrained. They invest up to .39€ more per extra euro of collateral, and they finance this additional investment by issuing more debt. This result is obtained by looking at the specific case of the Ile de France real estate bubble of the 90s, which we use as a natural experiment providing exogenous variations in land value. Consistent with the view of efficient internal capital markets, we find that the effect collateral on corporate investment is limited to stand-alone firms.

Keywords: Internal financial markets; real estate bubble (search for similar items in EconPapers)
JEL-codes: G21 G32 R33 (search for similar items in EconPapers)
Date: 2007
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https://www.bnsp.insee.fr/ark:/12148/bc6p06zr0b0/f1.pdf Document de travail de la DESE numéro G2007/08 (application/pdf)

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Persistent link: https://EconPapers.repec.org/RePEc:nse:doctra:g2007-08

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