TY  - JOUR
AU  - Chaney,Thomas
AU  - Sraer,David
AU  - Thesmar,David
TI  - The Collateral Channel: How Real Estate Shocks Affect Corporate Investment
JF  - National Bureau of Economic Research Working Paper Series
VL  - No. 16060
PY  - 2010
Y2  - June 2010
UR  - http://www.nber.org/papers/w16060
L1  - http://www.nber.org/papers/w16060.pdf
N1  - Author contact info:
Thomas Chaney
Department of Economics
University of Chicago
1126 East 59th Street
Chicago, IL 60637
Tel: 773/702-5403
Fax: 773/702-8490
E-Mail: thomas.chaney@gmail.com

David Sraer
Princeton University
Bendheim Center for Finance
26 Prospect Avenue
Princeton, NJ 08540
Tel: 609/258-1638
E-Mail: dsraer@princeton.edu

David Thesmar
HEC Paris
1 rue de la libération
78351 Jouy-en-Josas cedex
France
Tel: 33139679412
E-Mail: thesmar@hec.fr
M2  - featured in NBER digest on 2010-09-01
AB  - What is the impact of real estate prices on corporate investment? In the presence of financing frictions, firms use pledgeable assets as collateral to finance new projects. Through this collateral channel, shocks to the value of real estate can have a large impact on aggregate investment. Over the 1993-2007 period, the representative U.S. corporation invests 6 cents out of each additional dollar of collateral. To compute this sensitivity, we use local variations in real estate prices as shocks to the collateral value of firms that own real estate. We address the endogeneity of local real estate prices using the interaction of interest rates and local constraints on land supply as an instrument. We address the endogeneity of the decision to own land (1) by controlling for observable determinants of ownership and (2) by looking at the investment behavior of firms before and after they acquire land. The sensitivity of investment to collateral value is stronger the more likely a firm is to be credit constrained.
ER  -