Corporate Governance and Collateral Effect of Real Estate
Author
Start Page / End Page
Volume
Issue Number
Year
Publication
Daxuan Zhao
117 / 138
27
1
2024
International Real Estate Review
Abstract
The collateral channel literature predicts that soaring real estate prices increase the debt capacity of firms with more real estate asset holdings. This paper discusses the different relationships between collateral and investment. We find that firms with strong corporate governance were more likely to increase debt capacity via the collateral channel during the real estate boom from 1993 to 2006. Entrenched managers used less debt to finance their investments when their real estate collateral values increased. Our results hold even after controlling for non-collateralized debts and credit rating of the sample firms.
Keywords
Collateral Effect, Corporate Governance, G-Index, Real Estate Assets, Investment Decisions