Abstract
This paper studies the impact of real estate prices on the payout policy of firms. 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 a $1 increase in the value of CRE assets results in a 0.33 cents increase in the cash dividends, and a 0.27 cents increase in share repurchases. Because firms are reluctant to decrease their dividend payout, the decrease in dividends when the value of their CRE assets decreases is either small or insignificant. We also find that firms that experience positive shocks to the value of their CRE assets smooth their dividends more and increase their probability of paying dividends.
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