Housing Collateral and Entrepreneurship
March 25, 2015Poverty and Applied Microeconomics Seminar Series

Martin C. Schmalz (Stephen M. Ross School of Business, University of Michigan) will present the results of recent research.

Speaker: Martin C. Schmalz (Stephen M. Ross School of Business, University of Michigan) a financial economist with theoretical and empirical research interests. His latest project at the intersection of industrial organization, finance, and corporate governance measures how common ownership of firms by super-sized asset managers affects product market competition. More »

Abstract: This paper shows that collateral constraints restrict firm entry and post-entry growth, even in the long-run. Our empirical strategy uses French administrative data and exploits cross-sectional variation in local house-price appreciation as shocks to the value of collateral available to homeowners. We control for local demand shocks by comparing homeowners to two control groups that live in the same region but do not experience collateral shocks: (i) renters and (ii) homeowners with a mortgage outstanding, who - in France - cannot take out a second mortgage on their house. In both comparisons, we find that an increase in collateral value leads to a higher probability of becoming an entrepreneur. Conditional on entry, entrepreneurs with access to more valuable collateral start larger firms, use more debt, and create more value added, for at least six years after creation.

PaperHousing Collateral and Entrepreneurship

Last Updated: Mar 19, 2015

The Poverty and Applied Micro Seminar Series is a weekly series hosted by the World Bank's research department. The series invites leading researchers in applied microeconomics from the fields of poverty, human development and public service delivery, agriculture and rural development, political economy, behavioral economics, private sector development, and a range of other fields to present the results of their most recent research in a seminar format. The full list of seminars can be viewed here.

Event Details
  • Date: March 25, 2015
  • Location: World Bank Headquarters, MC3-570
  • Time: 12:30 - 2:00 PM
  • CONTACT: Anna Bonfield