Unconventional monetary policy and corporate real estate investment: a Dual perspective on collateral substitution and governance

Real estate investment is a crucial component of corporate asset allocation. Its excessive expansion can squeeze out productive resources, inhibit R&D and innovation investment, and hinder the development of the real economy. Leveraging the 2018 Medium-Term Lending Facility (MLF) collateral expansion policy as a quasi-natural experiment and using data on Chinese A-share listed firms from 2013 to 2024, we find the policy significantly restrains corporate real estate investment. Specifically, firms affected by the policy experience an average reduction of approximately 0.525% points in real estate investment. This effect operates through two channels: Corporate governance channel and collateral substitution channel. Heterogeneity analysis reveals that the effect is more pronounced among enterprises with weaker bank-enterprise linkages, lower level of corporate governance, lagging regional financial development, and lower risk-taking capacity. Further analysis shows that after reducing real estate investment, firms reallocate funds towards equipment-based fixed assets, R&D investment, and highly educated talent, ultimately driving higher innovation. These findings provide micro-evidence on how unconventional monetary policy (UMP) guides firms to optimize asset allocation and promote the real economy. Additionally, this study offers policy implications for improving the collateral framework and curbing speculative demand.