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Home purchase restriction, real estate investment, and corporate innovation

Author

Listed:
  • Weida Kuang

    (Renmin University of China)

  • Changyu Chen

    (Renmin University of China)

  • Qilin Wang

    (Hunan University)

Abstract

It is ubiquitous for non-real estate firms to conduct real estate business in China. Home purchase restriction (HPR) affects corporate innovation by dampening the real estate investment of non-real estate firms. The extant literature has examined the impact of HPR on corporate innovation, but it has not focused on the expectation of HPR and the endogeneity problem. Employing a dataset of 1830 listed non-real estate firms over the period 2009–2016, this research explores the expectation of HPR on corporate innovation based on the motivations for real estate investment in non-real estate firms. We demonstrate that HPR facilitates the enhancement of research and development (R&D) investment in non-real estate listed firms by hindering real estate investment, particularly for non-high-tech firms. The effects of HPR arrive at the crest in the third implementation year and remain steady thereafter. The real estate investment of non-real estate firms rebounds and the R&D investment declines along with the cancellation of HPR. Tackling the selection bias and endogeneity problems, the baseline results are also robust. Hence, HPR should serve as a long-term vehicle to improving corporate innovation, in addition to preventing housing speculation.

Suggested Citation

  • Weida Kuang & Changyu Chen & Qilin Wang, 2020. "Home purchase restriction, real estate investment, and corporate innovation," Frontiers of Business Research in China, Springer, vol. 14(1), pages 1-21, December.
    • Handle: RePEc:spr:fobric:v:14:y:2020:i:1:d:10.1186_s11782-020-00091-5
    DOI: 10.1186/s11782-020-00091-5
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    References listed on IDEAS

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