We study the effects of PPP loans on business competition. We start by introducing temporary cash subsidies into a model of monopolistic competition with differentiated products and heterogeneous production costs. We test the predictions of our model in a sample of U.S. airport hotels for which we observe daily demand, prices, output, and profits. Consistent with model predictions, less profitable businesses were more likely to apply for PPP loans. Businesses with active PPP loans reduced prices, boosting output and profits relative to non-PPP competitors. Those relative differences were reversed once PPP loans expired. We calculate that, for every dollar of PPP subsidies, PPP hotels earned 72.4 cents in extra profits and non-PPP competitors lost 71.4 cents in aggregate. Our results suggest that the PPP initiative distorted competition, imposing significant costs on businesses that chose to forgo these loans.

Using granular data on U.S. hotel investments over the past two decades, we show that industry-specialist PE firms achieve higher net income from operations and higher capital gains from sale than generalist PE firms for comparable properties. Those results are driven by specialists implementing more and larger cost savings without compromising revenues. Fundamentally, specialists utilize their hotel-specific operating expertise to produce superior performance outcomes. We show that specialists across investment sectors possess deeper industry-specific operating expertise. Our results suggest that specialist PE firms can compete with their generalist rivals by leveraging such expertise in a chosen market niche.

Real estate—housing in particular—is a less profitable investment in the long run than previously thought. We hand-collect property-level financial data for the institutional real estate portfolios of four large Oxbridge colleges over the period 1901–1983. Gross income yields initially fluctuate around 5%, but then trend downward (upward) for agricultural and residential (commercial) real estate. Long-term real income growth rates are close to zero for all property types. Our findings imply annualized real total returns, net of costs, ranging from approximately 2.3% for residential to 4.5% for agricultural real estate.

Ample literature builds on the notion that real estate values boost corporate secured borrowing (“collateral channel”). A comprehensive contract-level database allows us to observe the value, location, and end-use of firms’ real estate holdings in the US and all debts raised against those assets over the 2000–2017 period. Firms raise new debt following an increase in the value of their real estate but use unsecured rather than secured borrowing. We rationalize these findings with a model where firms’ choices between secured and unsecured debt reflect the systematic risk exposures of the assets on their balance sheets. While secured debt may be seen as a safer claim than unsecured debt contractually, we demonstrate that it can be riskier from an economic perspective. Our analysis adds new insight into how firms set their debt structure.