Payout Policy and Real Estate Prices
49 Pages Posted: 1 Dec 2015 Last revised: 11 Nov 2016
Date Written: November 18, 2015
This paper studies the impact of real estate prices on payout policy. Firms use corporate real estate (CRE) assets as collateral to obtain debt. Through this collateral channel, positive shocks to the value of CRE assets allow firms to increase their leverage in order to finance not only investments but also payouts. We find that an increase in the value of CRE assets results in an increase in cash dividends and share repurchases. These effects are stronger in periods of increasing values of CRE, as well as for firms with few investment opportunities and low leverage.
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