Does Housing Boom Boost Corporate Financialization?—Evidence from China

ABSTRACT

This paper provides a fresh look to investigate the linkage between rising house prices and corporate financialization. We match data of house prices in 237 cities with publicly listed non-financial and non-real estate companies to establish the causal relationship and further examine the underlying mechanism. The empirical study confirms that rising housing prices have a positive impact on corporate financialization, thereby emphasizing the significance of the housing boom for corporate financialization. We find that the deterring effect is stronger for firms with high cash holdings and is primarily driven by manufacturing firms. In addition, this study explores the potential mechanism generated by financing constraints and investment opportunities. The empirical results show that the housing price boom plays a significant role in promoting corporate financialization by releasing financing constraints.

KEYWORDS:

• House price
• corporate financialization
• financing constraints
• Collateral channel

JEL CLASSIFICATION:

• M41
• G30
• G31

Disclosure Statement

No potential conflict of interest was reported by the author(s).

Additional information

Funding

This work was supported by the National Natural ScienceFoundation of China [72173099].