Payout Policy and Real Estate Prices

49 Pages Posted: 1 Dec 2015 Last revised: 11 Nov 2016

See all articles by Anil Kumar

Anil Kumar

Aarhus University, Department of Economics & Business Economics; Danish Finance Institute

Carles Vergara-Alert

University of Navarra - IESE Business School

Date Written: November 18, 2015

Abstract

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.

Suggested Citation

Kumar, Anil and Vergara-Alert, Carles, Payout Policy and Real Estate Prices (November 18, 2015). Available at SSRN: https://ssrn.com/abstract=2697501 or http://dx.doi.org/10.2139/ssrn.2697501

Anil Kumar (Contact Author)

Aarhus University, Department of Economics & Business Economics ( email )

Fuglesangs Alle 4
Aarhus V, 8210
Denmark

Danish Finance Institute ( email )

Carles Vergara-Alert

University of Navarra - IESE Business School ( email )

Av. Pearson 21
Barcelona, 08034
Spain
+34 932544200 (Phone)
+34 932534343 (Fax)

HOME PAGE: http://web.iese.edu/cvergara/

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