This paper examines the impact of real estate prices on firm capital structure decisions. For a typical U.S. listed company, a one-standard-deviation increase in predicted value of firm pledgeable collateral translates into a 3 percentage points increase in firm leverage ratio. The identification strategy employs a triple interaction of MSA-level land supply elasticity, real estate prices, and a measure of a firm's real estate holdings as an exogenous source of variation in firm collateral values. Firms significantly change their debt structure in response to collateral value appreciation. The results indicate the importance of collateral values in mitigating potential informational imperfections.

By considering banks as portfolios of assets in different locations, we study how real estate shocks are transmitted across bank’s business areas, while controlling for local demand shocks and bank location-specific factors. Affected banks substantially alter their loan portfolios: we find evidence of real estate price declines affecting both real estate and non-real-estate types of lending. Banks also roll over and fail to liquidate problematic loans, while accumulating more nonperforming loans. These results provide evidence of internal contagion in real estate shocks within banks.

We study the impact of opioid abuse on real estate prices. We document that opioid death rates and excess prescription rates are negatively associated with house prices. Exploiting the staggered passage of opioid-limiting legislation, we find that a decrease in opioid abuse results in higher county-level house prices. This effect is due to fewer mortgage delinquencies, lower vacancy rates, more home improvement loans, and increased population inflow. Our findings are consistent with improved real estate conditions and a rise in local demand. These results highlight the importance of public health policy in mitigating the economic costs of the opioid epidemic.

This paper uses variation in real estate prices to study Chief Executive Officer (CEO) pay for luck. We distinguish between pay for luck and pay for responding to luck (action) by exploiting US GAAP accounting rules, which mandate that real estate used in the firm’s operations is not marked-to-market. This setting allows us to empirically disentangle pay for luck from pay for action, as a change in the value of real estate is only accounted for when the CEO responds to changes in property value. We show that CEO compensation is associated with the following two managerial responses to changes in real estate values: (i) real estate sales and (ii) debt issuance. Overall, we show that CEOs are rewarded for taking value-enhancing actions in response to luck.

The growth of the asset management industry has made it commonplace for firms to have multiple institutional blockholders. In such firms, the strength of governance via exit depends on how blockholders react to each other’s exit. We present a model to show that open-ended institutional investors such as mutual funds react strongly to an informed blockholder’s exit, leading to correlated exits that enhance corporate governance. Our analysis points to a new role for mutual funds in corporate governance. We examine the trades of mutual funds around exits by activist hedge funds to present empirical evidence consistent with our model.

We investigate whether business ties with portfolio firms influence mutual funds' proxy voting using a comprehensive data set spanning 2003 to 2011. In contrast to prior literature, we find that business ties significantly influence promanagement voting at the level of individual pairs of fund families and firms after controlling for Institutional Shareholder Services (ISS) recommendations and holdings. The association is significant only for shareholder‐sponsored proposals and stronger for those that pass or fail by relatively narrow margins. Our findings are consistent with a demand‐driven model of biased voting in which company managers use existing business ties with funds to influence how they vote.