Home purchase restriction, real estate investment, and corporate innovation

Weida Kuang,Qilin Wang,Changyu Chen

doi:10.1186/s11782-020-00091-5

Abstract

It is ubiquitous for non-real estate firms to conduct real estate business in China. Home purchase restriction (HPR) affects corporate innovation by dampening the real estate investment of non-real estate firms. The extant literature has examined the impact of HPR on corporate innovation, but it has not focused on the expectation of HPR and the endogeneity problem. Employing a dataset of 1830 listed non-real estate firms over the period 2009–2016, this research explores the expectation of HPR on corporate innovation based on the motivations for real estate investment in non-real estate firms. We demonstrate that HPR facilitates the enhancement of research and development (R&D) investment in non-real estate listed firms by hindering real estate investment, particularly for non-high-tech firms. The effects of HPR arrive at the crest in the third implementation year and remain steady thereafter. The real estate investment of non-real estate firms rebounds and the R&D investment declines along with the cancellation of HPR. Tackling the selection bias and endogeneity problems, the baseline results are also robust. Hence, HPR should serve as a long-term vehicle to improving corporate innovation, in addition to preventing housing speculation.

Highlights

Non-real estate firms involved in the real estate business are ubiquitous and pervasive in China, which account for roughly 42% of non-real estate firms listed in China’s Shanghai and Shenzhen stock exchanges during the period 2009–2016, in keeping with Liu and Guan (2019), Meng et al (2018), and Rong and Wang (2014).1 In addition, real estate investment is widespread in various industries in China
The Home purchase restriction (HPR) serves as a key vehicle for cooling down the housing demand and house prices in some cities in China
This research exploits whether the implementation and cancellation of the HPR affect the real estate investment and the corporate innovation in the listed non-real estate firms

Summary

Introduction

Non-real estate firms involved in the real estate business are ubiquitous and pervasive in China, which account for roughly 42% of non-real estate firms listed in China’s Shanghai and Shenzhen stock exchanges during the period 2009–2016, in keeping with Liu and Guan (2019), Meng et al (2018), and Rong and Wang (2014). In addition, real estate investment is widespread in various industries in China. This research provides evidence for policymakers to evaluate the spillover effects of HPR on non-real estate firms to improve corporate innovation. The non-real estate firms enhance their financing capability through the collateral effects of real estate investment, which satisfies the capital demand of innovation activities and promotes main business development. This research utilizes the dataset of 1,830 non-real estate listed firms in the Shanghai and Shenzhen exchange markets over the period 2009–2016 to explore the mediating mechanism of HPR and the impacts of HPR expectation on corporate innovation.

Literature review

Findings

Conclusions and policy implications