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  3. American Economic Review
  4. July 2020
  5. Home Values and Firm Behavior

American Economic Review

ISSN 0002-8282 (Print) | ISSN 1944-7981 (Online)

Home Values and Firm Behavior

  • Saleem Bahaj
  • Angus Foulis
  • Gabor Pinter
American Economic Review
vol. 110, no. 7, July 2020
(pp. 2225–70)
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Abstract

The homes of firm owners are an important source of finance for ongoing businesses. We use UK microdata to show that a £1 increase in the value of the homes of a firm's directors increases the firm's investment by £0.03. This effect is concentrated among firms whose directors' homes are valuable relative to the firm's assets, that are financially constrained, and that have directors who are personally highly levered. An aggregation exercise shows that directors' homes are as important as corporate property for collateral driven fluctuations in aggregate investment demand.

Citation

Bahaj, Saleem, Angus Foulis, and Gabor Pinter. 2020. "Home Values and Firm Behavior." American Economic Review, 110 (7): 2225–70. DOI: 10.1257/aer.20180649

Additional Materials

JEL Classification

  • D22 Firm Behavior: Empirical Analysis
  • D25 Intertemporal Firm Choice: Investment, Capacity, and Financing
  • E22 Investment; Capital; Intangible Capital; Capacity
  • G31 Capital Budgeting; Fixed Investment and Inventory Studies; Capacity
  • G34 Mergers; Acquisitions; Restructuring; Voting; Proxy Contests; Corporate Governance
  • R31 Housing Supply and Markets