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Matching Capital and Labor

Author

Listed:
  • JONATHAN B. BERK
  • JULES H. van BINSBERGEN
  • BINYING LIU

Abstract

We establish an important role for the firm by studying capital reallocation decisions of mutual fund firms. The firm's decision to reallocate capital among its mutual fund managers adds at least $474,000 a month, which amounts to over 30% of the total value added of the industry. We provide evidence that this additional value added results from the firm's private information about the skill of its managers. The firm captures this value because investors reward the firm following a capital reallocation decision by allocating additional capital to the firm's funds.

Suggested Citation

  • JONATHAN B. BERK & JULES H. van BINSBERGEN & BINYING LIU, 2017. "Matching Capital and Labor," Journal of Finance, American Finance Association, vol. 72(6), pages 2467-2504, December.
    • Handle: RePEc:bla:jfinan:v:72:y:2017:i:6:p:2467-2504
    DOI: 10.1111/jofi.12542
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    JEL classification:

    • D22 - Microeconomics - - Production and Organizations - - - Firm Behavior: Empirical Analysis
    • G11 - Financial Economics - - General Financial Markets - - - Portfolio Choice; Investment Decisions
    • G12 - Financial Economics - - General Financial Markets - - - Asset Pricing; Trading Volume; Bond Interest Rates
    • G2 - Financial Economics - - Financial Institutions and Services
    • G20 - Financial Economics - - Financial Institutions and Services - - - General
    • G3 - Financial Economics - - Corporate Finance and Governance
    • G30 - Financial Economics - - Corporate Finance and Governance - - - General
    • J01 - Labor and Demographic Economics - - General - - - Labor Economics: General
    • J24 - Labor and Demographic Economics - - Demand and Supply of Labor - - - Human Capital; Skills; Occupational Choice; Labor Productivity
    • L22 - Industrial Organization - - Firm Objectives, Organization, and Behavior - - - Firm Organization and Market Structure
    • L2 - Industrial Organization - - Firm Objectives, Organization, and Behavior

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