Loading…

Housing Collateral and Entrepreneurship

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 re...

Full description

Saved in:
Bibliographic Details
Published in:The Journal of finance (New York) 2017-02, Vol.72 (1), p.99-132
Main Authors: SCHMALZ, MARTIN C., SRAER, DAVID A., THESMAR, DAVID
Format: Article
Language:English
Subjects:
Citations: Items that this one cites
Items that cite this one
Online Access:Get full text
Tags: Add Tag
No Tags, Be the first to tag this record!
Description
Summary: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 entry, treated entrepreneurs use more debt, start larger firms, and remain larger in the long run.
ISSN:0022-1082
1540-6261
DOI:10.1111/jofi.12468