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Long-Term Attachments and Long-Run Firm Rates of Return

  • Peter F. Orazem

    ()

    (Department of Economics, 267 Heady Hall, Iowa State University)

  • Marvin L. Bouillon

    (Department of Accounting, Iowa State University)

  • Benjamin M. Doran

    (Department of Accounting, Iowa State University)

Long-term attachments between workers and firms are common. Numerous studies have examined worker returns to tenure, but little is known of firm returns to firm–worker matches. Yet these attachments represent a human capital asset quasi-held by the firm, which is not captured by traditional accounting measures of firm assets. Firms with large quasi-holdings of human capital will have higher measured return on assets, other things equal. Analysis of data on 250 large manufacturing firms supports the view that firms profit from long-term attachments with their workers. Consequently, unmeasured human capital assets contribute to the explanation of persistence in measured long-run excess profits across firms.

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Article provided by Southern Economic Association in its journal Southern Economic Journal.

Volume (Year): 71 (2004)
Issue (Month): 2 (October)
Pages: 314-333

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Handle: RePEc:sej:ancoec:v:71:2:y:2004:p:314-333
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