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Financial Frictions and Investment Dynamics in Multi-Plant Firms

Matthias Kehrig and Nicolas Vincent

Working Papers from U.S. Census Bureau, Center for Economic Studies

Abstract: Using confidential Census data on U.S. manufacturing plants, we document that most of the dispersion in investment rates across plants occurs within rms instead of across firms. Between- firm dispersion is almost acyclical, but within- rm dispersion is strongly procyclical. To investigate the role of rms in the allocation of capital in the economy, we build a multi-plant model of the firm with frictions at both levels of aggregation. We show that external nancing constraints at the level of the rm can have important implications for plant-level investment dynamics. Finally, we present empirical evidence supporting the predictions of the model.

Keywords: Investment; Plants vs. Firms; Q-Theory; Internal vs. External Capital Markets; Diversification Discount. (search for similar items in EconPapers)
JEL-codes: E2 G3 (search for similar items in EconPapers)
Pages: 32 pages
Date: 2013-10
New Economics Papers: this item is included in nep-bec
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Citations: View citations in EconPapers (5) Track citations by RSS feed

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