Land value and corporate investment: Evidence from Japanese panel data

We use a panel data set of Japanese firms to compare the role of land as collateral between firms in industrial groups (keiretsu) and independent firms. For each set of firms we use GMM to estimate the Euler equation of the investment decision rule with borrowing constraints and dependence on land, which is explicit in the model. We find borrowing constraints for keiretsu firms to be less severe than those for independent firms, but uncover no statistical difference in the marginal effect of collateral on borrowing constraints between the two types of firms. (C) 1998 Academic Press.