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Real estate prices and firm borrowings: Micro evidence from China

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  • Chen, Pu
  • Wang, Chunyang
  • Liu, Yangyan

Abstract

Real estate price appreciation can lessen firm's financial constraint by increasing its collateral value. This paper studies this channel by utilizing a large firm-level dataset during the 2000–2007 period on Chinese firms. In contrast to Wu, Gyourko, and Deng (2015) that collateral channel effect in China does not exist either for firms overall or for private firms, we provide empirical evidence on the presence of collateral channel effect and show the effect is significant for private firms but not significant for state owned enterprises, whose behavior is more of political based. Further analysis shows that firms significantly change their debt structures in response to real estate price shocks.

Suggested Citation

  • Chen, Pu & Wang, Chunyang & Liu, Yangyan, 2015. "Real estate prices and firm borrowings: Micro evidence from China," China Economic Review, Elsevier, vol. 36(C), pages 296-308.
    • Handle: RePEc:eee:chieco:v:36:y:2015:i:c:p:296-308
    DOI: 10.1016/j.chieco.2015.10.002
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    Cited by:

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    6. Yu, Liangliang & Cai, Yinying, 2021. "Do rising housing prices restrict urban innovation vitality? Evidence from 288 cities in China," Economic Analysis and Policy, Elsevier, vol. 72(C), pages 276-288.
    7. Qianhui Yu & Yanying Chen & Feng Helen Liang, 2021. "Housing Market Speculation and Firm Productivity: Evidence from China," China & World Economy, Institute of World Economics and Politics, Chinese Academy of Social Sciences, vol. 29(5), pages 148-174, September.
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    9. Xu Zhang & Xiaoxing Liu & Jianqin Hang & Dengbao Yao & Guangping Shi, 2016. "Do Urban Rail Transit Facilities Affect Housing Prices? Evidence from China," Sustainability, MDPI, vol. 8(4), pages 1-14, April.
    10. Libin Han & Ming Lu, 2017. "Housing prices and investment: an assessment of China's inland-favoring land supply policies," Journal of the Asia Pacific Economy, Taylor & Francis Journals, vol. 22(1), pages 106-121, January.
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    12. Shenzhe Jiang & Jianjun Miao & Yuzhe Zhang, 2022. "China'S Housing Bubble, Infrastructure Investment, And Economic Growth," International Economic Review, Department of Economics, University of Pennsylvania and Osaka University Institute of Social and Economic Research Association, vol. 63(3), pages 1189-1237, August.
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    More about this item

    Keywords

    Real estate prices; Borrowings; Collateral effect;
    All these keywords.

    JEL classification:

    • D22 - Microeconomics - - Production and Organizations - - - Firm Behavior: Empirical Analysis
    • G00 - Financial Economics - - General - - - General
    • R30 - Urban, Rural, Regional, Real Estate, and Transportation Economics - - Real Estate Markets, Spatial Production Analysis, and Firm Location - - - General

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