Housing collateral and entrepreneurship

Schmalz, Martin C., Sraer, David A. and Thesmar, David (2017) Housing collateral and entrepreneurship. Journal of Finance, 72 (1). pp. 99-132.

Abstract

We show that collateral constraints restrict firm entry and postentry growth, using French administrative data and cross-sectional variation in local house-price appreciation as shocks to collateral values. We control for local demand shocks by comparing treated homeowners to controls in the same region that do not experience collateral shocks: renters and homeowners with an outstanding mortgage, who (in France)cannot take out a second mortgage. In both comparisons, an increase in collateral value leads to a higher probability of becoming an entrepreneur. Conditional on en-try, treated entrepreneurs use more debt, start larger firms, and remain larger in the long run.

Item Type: Article
Keywords: finance
Subject(s): Finance
Date Deposited: 13 Dec 2018 16:01
Last Modified: 13 Dec 2018 16:01
Funders: n/a
URI: http://eureka.sbs.ox.ac.uk/id/eprint/7198

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