The relationship of firm growth and Q with multiple capital goods: theory and evidence from panel data on Japanese firms
Fumio Hayashi and
No 13, Discussion Paper / Institute for Empirical Macroeconomics from Federal Reserve Bank of Minneapolis
We develop a Q model of investment with multiple capital goods that delivers 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 over six hundred 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 that comprises the error term in the growth-Q relation. The Q variable is significantly related to firm growth. Much, but not all, of the apparent explanatory power of cash flow disappears if its endogeneity is corrected for. The estimated Q coefficient is not implausibly small if the growth rate of the capital aggregate contains measurement error.
Keywords: Japan; Business enterprises - Japan (search for similar items in EconPapers)
References: Add references at CitEc
Citations: View citations in EconPapers (7) Track citations by RSS feed
Downloads: (external link)
Our link check indicates that this URL is bad, the error code is: 403 Forbidden (http://minneapolisfed.org/research/common/pub_detail.cfm?pb_autonum_id=13 [301 Moved Permanently]--> https://www.minneapolisfed.org/research/common/pub_detail.cfm?pb_autonum_id=13)
Our link check indicates that this URL is bad, the error code is: 403 Forbidden (http://minneapolisfed.org/research/DP/DP13.pdf [301 Moved Permanently]--> https://www.minneapolisfed.org/research/DP/DP13.pdf)
This item may be available elsewhere in EconPapers: Search for items with the same title.
Export reference: BibTeX
RIS (EndNote, ProCite, RefMan)
Persistent link: https://EconPapers.repec.org/RePEc:fip:fedmem:13
Ordering information: This working paper can be ordered from
Access Statistics for this paper
More papers in Discussion Paper / Institute for Empirical Macroeconomics from Federal Reserve Bank of Minneapolis Contact information at EDIRC.
Bibliographic data for series maintained by Jannelle Ruswick ( this e-mail address is bad, please contact ).