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Real estate prices and firm borrowings: Micro evidence from China

Author

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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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    3. 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.
    4. 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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    7. Yuhao Wang & Jiaxian Shen & Jinnan Pan & Tingqiang Chen, 2022. "A Credit Risk Contagion Intensity Model of Supply Chain Enterprises under Different Credit Modes," Sustainability, MDPI, vol. 14(20), pages 1-26, October.
    8. Kun Liang & Chen Zhang & Cuiqing Jiang, 2022. "Analyzing default risk among P2P platforms based on the LAS-STACK method by considering multidimensional signals under specific economic contexts," Electronic Commerce Research, Springer, vol. 22(1), pages 77-111, March.
    9. Shenzhe Jiang & Jianjun Miao & Yuzhe Zhang, 2019. "China’s Housing Bubble, Infrastructure Investment, and Economic Growth," Boston University - Department of Economics - Working Papers Series WP2020-005, Boston University - Department of Economics.
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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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