Abstract
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.
| Original language | English |
|---|---|
| Pages (from-to) | 75-92 |
| Journal | Journal of Corporate Finance |
| Volume | 36 |
| DOIs | |
| Publication status | Published - 1 Feb 2016 |
UN SDGs
This output contributes to the following UN Sustainable Development Goals (SDGs)
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SDG 11 Sustainable Cities and Communities
Research Keywords
- Collateral
- Financing capacity
- Performance
- Product market competition
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