EconPapers    
Economics at your fingertips  
 

The Relation Between Firm Growth and Q with Multiple Capital Goods: Theory and Evidence from Panel Data on Japanese Firms

Fumio Hayashi and Tohru Inoue

No 3326, NBER Working Papers from National Bureau of Economic Research, Inc

Abstract: We derive from a model of investment with multiple capital goods a one-to-one relation between the growth rate of the capital aggregate and the stock market-based Q. We estimate the growth-Q relation using a panel of Japanese manufacturing firms taking into account the endogeneity of Q. Identification is achieved by combining the theoretical structure of the Q model and an assumed serial correlation structure of the technology shock which is the error term in the growth-Q equation. For early years of our sample. cash flow has significant explanatory power over and above Q. The significance of cash flow disappears for more recent years for the heavy industry when Japanese capital markets was liberalized. The estimated Q coefficient implies that the adjustment cost is less than a half of gross profits net of the adjustment cost.

Date: 1990-04
Note: PR ME
References: View references in EconPapers View complete reference list from CitEc
Citations View citations in EconPapers (3) Track citations by RSS feed

Published as Econometrica, Vol. 59, No. 3, May 1991, pp. 731-753.

Downloads: (external link)
http://www.nber.org/papers/w3326.pdf (application/pdf)

Related works:
Journal Article: The Relation between Firm Growth and Q with Multiple Capital Goods: Theory and Evidence from Panel Data on Japanese Firms (1991) Downloads
This item may be available elsewhere in EconPapers: Search for items with the same title.

Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text

Persistent link: http://EconPapers.repec.org/RePEc:nbr:nberwo:3326

Ordering information: This working paper can be ordered from
http://www.nber.org/papers/w3326

Access Statistics for this paper

More papers in NBER Working Papers from National Bureau of Economic Research, Inc National Bureau of Economic Research, 1050 Massachusetts Avenue Cambridge, MA 02138, U.S.A.. Contact information at EDIRC.
Series data maintained by ().

 
Page updated 2017-03-26
Handle: RePEc:nbr:nberwo:3326