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Collateral Damage? Decreasing House Prices and Entrepreneurial Lending

Author

Listed:
  • Remco Mocking
  • Benedikt Vogt

    (CPB Netherlands Bureau for Economic Policy Analysis)

  • Wolter Hassink

Abstract

We study the effect of housing collateral on entrepreneurial lending in the Netherlands. This residential collateral channel is especially relevant for sole proprietors for whom there is no legal distinction between the owner and the business. We make use of unique administrative data on outstanding bank credit of all Dutch sole proprietorships in the period 2007 - 2012. Our estimates indicate that home owning entrepreneurs were hit less severe in the times of crisis than renting entrepreneurs. Relative to renters, during the economic crisis, the incidence of having outstanding bank credit decreased 2% percent less for home owners. Home owners also experience a 40 basis points weaker increase in costs of credit compared to renters. Within the group of home owners higher LTVs only go along with higher prices during the crisis relative to lower LTVs.

Suggested Citation

  • Remco Mocking & Benedikt Vogt & Wolter Hassink, 2017. "Collateral Damage? Decreasing House Prices and Entrepreneurial Lending," CPB Discussion Paper 351, CPB Netherlands Bureau for Economic Policy Analysis.
    • Handle: RePEc:cpb:discus:351
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    References listed on IDEAS

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    1. Szumilo, Nikodem & Vanino, Enrico, 2021. "Mortgage affordability and entrepreneurship: Evidence from spatial discontinuity in Help-to-Buy equity loans," Journal of Business Venturing, Elsevier, vol. 36(4).

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    More about this item

    JEL classification:

    • G23 - Financial Economics - - Financial Institutions and Services - - - Non-bank Financial Institutions; Financial Instruments; Institutional Investors
    • R2 - Urban, Rural, Regional, Real Estate, and Transportation Economics - - Household Analysis
    • R31 - Urban, Rural, Regional, Real Estate, and Transportation Economics - - Real Estate Markets, Spatial Production Analysis, and Firm Location - - - Housing Supply and Markets
    • L26 - Industrial Organization - - Firm Objectives, Organization, and Behavior - - - Entrepreneurship

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