Real Estate Mortgage Value And Cost Stickines

How asset price changes affect the real economy is an important academic topic.Real estate is a kind of important asset of enterprises,the fluctuation of collateral value of which,recently has been paid more and more attention.However,to date,the relevant research on the microeconomic consequences of real estate collateral value mainly focuses on the investment and financing behavior of enterprises,and there is no research investigating the effect of real estate collateral value on enterprise cost and expense stickiness.Cost and expense stickiness of firms refers to the asymmetric change of cost with the change of income.Theoretically,the real estate collateral value has a completely opposite impact on the Cost and expense stickiness through two theoretical paths-"financial support" and "debt constraint".On the one hand,according to the "financial support" hypothesis,the debt financing brought by the increase of real estate collateral value can help enterprises resist the operational risk caused by retaining current resources and reduce the resource downward-adjustment,whereby increasing the cost and expense stickiness of enterprises;On the other hand,according to the "debt constraint" hypothesis,the debt financing brought by the increase of real estate collateral value can pay an important constraint role on inhibiting the opportunistic behavior of management,such as perquisites and over-investment,reducing the cost and expense stickiness.Therefore,it is a completely empirical problem to test which theoretical expectation will play a leading role.Accordingly,using the exogenous impact of house price fluctuation and the sales data of commercial houses and commercial business houses in 35 large and mediumsized cities in China,this paper explores the impact of the change of real estate collateral value caused by house price fluctuation on the cost and expense stickiness of enterprises from 2007 to 2017.The results show that the increase of real estate collateral value caused by the rise of real estate price will significantly reduce the expense stickiness of enterprises,but does not affect the cost stickiness.This result may be caused by endogenous issues rather than causality.Thus,this paper has exploited a series of method including IV estimation,controlling tendency of purchasing house,using new proxy variables,excluding managers’ pessimistic expectations to ensure the robustness of the result.To further explore the how collateral value affects expense stickiness of firms,this paper carried out sub-sample regressions according to debt constraints and corporate finance.The results show that the decreasing effect of the increase of collateral value on the expense stickiness is more significant in the samples with more mortgage loans,higher interest costs,more abundant free cash flow,private enterprises and poor corporate governance.These results support the "debt constraint hypothesis".This research not only supplements the relevant literature on the microeconomic consequences of real estate collateral value and the influencing factors of enterprise cost and expense stickiness,but also has important practical and policy implications.