Does land price inflation “Squeeze out” Enterprise’s investment?——Evidence from Chinese manufacture enterprise
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| Title | Does land price inflation “Squeeze out” Enterprise’s investment?——Evidence from Chinese manufacture enterprise
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| Author | Zhang Lu and Yang Guang |
| Organization | Capital University of Economics and Business;Nankai University |
| Email | zhanglu_nk@126.com；yangg@nankai.edu.cn |
| Key Words | Investment Rate; Financial Constraint; Land Price |
| Abstract | This article study the impact of rapid growth of land price on manufacture enterprise’s external finance and investment. We find that the increase of land asset value due to housing price growth do reduce enterprise’s investment rate, through a “Relocation Channel” of firm land holding, instead of “Collateral Channel” due to financial friction. Specifically, in theoretical section, we construct a risk asset portfolio-choice model of enterprise which encounter financial constraint, and prove that emprise prefer to hold more land asset during real estate boom. Simulated result demonstrate “averse U” shape relationship between profit from real estate price growth and investment rate. In empirical section, based on the firm-level data from 1999-2007, we find land asset value inflation didn’t not help enterprises to obtain more loan, but lower the enterprises’ investment rate significantly. This result support the existence of “Relocation Channel” in china but not the “Collateral Channel”. Our conclusion has important implication for formulating industrial policy for manufacture sector and handling the “escape to virtual economy” problem. |
| Serial Number | WP1283 |
| Time | 2018-06-28 |
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