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Plant-Level Productivity and the Market Value of a Firm

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  • Douglas W Dwyer
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    Abstract

    Some plants are more productive than others – at least in terms of how productivity is conventionally measured. Do these differences represent an intangible asset? Does the stock market place a higher value on firms with highly productive plants? This paper tests this hypothesis with a new data set. We merge plant-level fundamental variables with firm-level financial variables. We find that firms with highly productive plants have higher market valuations as measured by Tobin's q – productivity does indeed have a price.

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    File URL: ftp://ftp2.census.gov/ces/wp/2001/CES-WP-01-03.pdf
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    Bibliographic Info

    Paper provided by Center for Economic Studies, U.S. Census Bureau in its series Working Papers with number 01-03.

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    Date of creation: Jun 2001
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    Handle: RePEc:cen:wpaper:01-03

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    Keywords: CES; economic; research; micro; data; microdata; chief; economist;

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    1. Hall, B.H., 1999. "Innovation and Market Value," Economics Papers 1999-w3, Economics Group, Nuffield College, University of Oxford.
    2. Zvi Griliches, 1984. "Market Value, R&D, and Patents," NBER Chapters, in: R & D, Patents, and Productivity, pages 249-252 National Bureau of Economic Research, Inc.
    3. Cooley, Thomas F. & Greenwood, Jeremy & Yorukoglu, Mehmet, 1997. "The replacement problem," Journal of Monetary Economics, Elsevier, Elsevier, vol. 40(3), pages 457-499, December.
    4. Douglas Dwyer, 1998. "Technology Locks, Creative Destruction, and Non-Convergence in Productivity Levels," Review of Economic Dynamics, Elsevier for the Society for Economic Dynamics, vol. 1(2), pages 430-473, April.
    5. Steven M. Fazzari & R. Glenn Hubbard & BRUCE C. PETERSEN, 1988. "Financing Constraints and Corporate Investment," Brookings Papers on Economic Activity, Economic Studies Program, The Brookings Institution, vol. 19(1), pages 141-206.
    6. Olley, G Steven & Pakes, Ariel, 1996. "The Dynamics of Productivity in the Telecommunications Equipment Industry," Econometrica, Econometric Society, Econometric Society, vol. 64(6), pages 1263-97, November.
    7. Charles P. Himmelberg & R. Glenn Hubbard & Darius Palia, 2000. "Understanding the Determinants of Managerial Ownership and the Link Between Ownership and Performance," NBER Working Papers 7209, National Bureau of Economic Research, Inc.
    8. Gilchrist, Simon & Himmelberg, Charles P., 1995. "Evidence on the role of cash flow for investment," Journal of Monetary Economics, Elsevier, Elsevier, vol. 36(3), pages 541-572, December.
    9. Griliches, Zvi, 1986. "Economic data issues," Handbook of Econometrics, Elsevier, in: Z. Griliches† & M. D. Intriligator (ed.), Handbook of Econometrics, edition 1, volume 3, chapter 25, pages 1465-1514 Elsevier.
    10. Hopenhayn, Hugo A, 1992. "Entry, Exit, and Firm Dynamics in Long Run Equilibrium," Econometrica, Econometric Society, Econometric Society, vol. 60(5), pages 1127-50, September.
    11. Cockburn, Iain & Griliches, Zvi, 1988. "Industry Effects and Appropriability Measures in the Stock Market's Valuation of R&D and Patents," American Economic Review, American Economic Association, American Economic Association, vol. 78(2), pages 419-23, May.
    12. Parente Stephen L., 1994. "Technology Adoption, Learning-by-Doing, and Economic Growth," Journal of Economic Theory, Elsevier, Elsevier, vol. 63(2), pages 346-369, August.
    13. Jovanovic, Boyan, 1982. "Selection and the Evolution of Industry," Econometrica, Econometric Society, Econometric Society, vol. 50(3), pages 649-70, May.
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    Cited by:
    1. Francois Gourio, 2006. "Firms' Heterogeneous Sensitivities to the Business Cycle, and the Cross-Section of Expected Returns," 2006 Meeting Papers, Society for Economic Dynamics 846, Society for Economic Dynamics.
    2. Coricelli, Fabrizio & Driffield, Nigel & Pal, Sarmistha & Roland, Isabelle, 2012. "When does leverage hurt productivity growth? A firm-level analysis," Journal of International Money and Finance, Elsevier, Elsevier, vol. 31(6), pages 1674-1694.
    3. François Gourio, 2005. "Operating Leverage,Stock Market Cyclicality,and the Cross-Section of Returns," Boston University - Department of Economics - Working Papers Series, Boston University - Department of Economics WP2005-002, Boston University - Department of Economics.
    4. Lakshmi Balasubramanyan & Ramesh Mohan, 2010. "How well is productivity being priced?," Journal of Economics and Finance, Springer, Springer, vol. 34(4), pages 415-429, October.

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