Product market effects of real estate collateral
Research output: Journal Publications and Reviews (RGC: 21, 22, 62) › 21_Publication in refereed journal › peer-review
Related Research Unit(s)
|Journal / Publication||Journal of Corporate Finance|
|Publication status||Published - 1 Feb 2016|
|Link to Scopus||https://www.scopus.com/record/display.uri?eid=2-s2.0-84947810992&origin=recordpage|
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.
- Collateral, Financing capacity, Performance, Product market competition