Is There Evidence of a Real Estate Collateral Channel Effect on Listed Firm Investment in China?
AbstractPrevious research on the United States and Japan finds economically large impacts of changing real estate collateral value on firm investment. Working with unique data on land values in 35 major Chinese markets and a panel of firms outside the real estate industry, we estimate investment equations that yield no evidence of a collateral channel effect. One reason for this stark difference appears to be that some of the most dominant firms in China are state-owned enterprises (SOEs) which are unconstrained in the sense that they do not need to rely on rising underlying property collateral values to obtain all the financing necessary to carry out their desired investment programs. However, we also find no collateral channel effect for non-SOEs when we perform our analysis on disaggregated sets of firms. Norms and regulation in the Chinese capital markets and banking sector can account for why there is no collateral channel effect operating among these firms. We caution that our results do not mean that there will be no negative fallout from a potential real estate bust on the Chinese economy. There are good reasons to believe there would be, just not through a standard collateral channel effect on firm investment.
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Bibliographic InfoPaper provided by National Bureau of Economic Research, Inc in its series NBER Working Papers with number 18762.
Date of creation: Feb 2013
Date of revision:
Note: CF ME PE
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Find related papers by JEL classification:
- E22 - Macroeconomics and Monetary Economics - - Consumption, Saving, Production, Employment, and Investment - - - Capital; Investment; Capacity
- G11 - Financial Economics - - General Financial Markets - - - Portfolio Choice; Investment Decisions
- G31 - Financial Economics - - Corporate Finance and Governance - - - Capital Budgeting; Fixed Investment and Inventory Studies
- R11 - Urban, Rural, Regional, Real Estate, and Transportation Economics - - General Regional Economics - - - Regional Economic Activity: Growth, Development, Environmental Issues, and Changes
- R3 - Urban, Rural, Regional, Real Estate, and Transportation Economics - - Real Estate Markets, Spatial Production Analysis, and Firm Location
- R39 - Urban, Rural, Regional, Real Estate, and Transportation Economics - - Real Estate Markets, Spatial Production Analysis, and Firm Location - - - Other
This paper has been announced in the following NEP Reports:
- NEP-ALL-2013-02-08 (All new papers)
- NEP-CNA-2013-02-08 (China)
- NEP-MAC-2013-02-08 (Macroeconomics)
- NEP-TRA-2013-02-08 (Transition Economics)
- NEP-URE-2013-02-08 (Urban & Real Estate Economics)
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