Housing Property Rights, Collateral, and Entrepreneurship: Evidence from China

Posted: 19 Jun 2019

See all articles by Gang-Zhi Fan

Gang-Zhi Fan

School of Management, Guangzhou University

Li Han

affiliation not provided to SSRN

Jiangyi Li

Sichuan University - School of Economics

Jian Zhang

Hong Kong Baptist University (HKBU) - Department of Finance and Decision Sciences

Date Written: June 11, 2019

Abstract

This paper provides new evidence on the impact of the housing collateral lending channel on entrepreneurial activities by allowing homeowners to access property equity and invest in new businesses. We exploit dual housing property rights forms in China as an instrument, where complete access to collateral values is only legally granted to homeowners with full property rights (FPR), with no access for those without FPR. Using data from a large survey, we find that increasing house prices significantly increases the probability of starting a new business for FPR homeowners relative to the control group. The effects are robust when we rely on the exogenous shock induced by the house purchase restriction and primarily driven by homeowners without household debt. Macro analysis supports a positive correlation between the concentration of FPR homeowners and employment and economic growth, where homeowners are better able to obtain external financing via the collateral channel.

Keywords: property rights, homeownership, entrepreneurship, collateral channel

JEL Classification: P26, L26, D14

Suggested Citation

Fan, Gang-Zhi and Han, Li and Li, Jiangyi and Zhang, Jian, Housing Property Rights, Collateral, and Entrepreneurship: Evidence from China (June 11, 2019). Available at SSRN: https://ssrn.com/abstract=3402256

Gang-Zhi Fan

School of Management, Guangzhou University ( email )

230 Wai Huan Xi Road
Guangzhou Higher Education Mega Center
Guangzhou, Guangdong 510006
China

Li Han

affiliation not provided to SSRN

Jiangyi Li

Sichuan University - School of Economics ( email )

Chengdu, Sichuan
China

Jian Zhang (Contact Author)

Hong Kong Baptist University (HKBU) - Department of Finance and Decision Sciences ( email )

Hong Kong

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