Firm-level Irreversibility

Hang Bai, Xuenan Li, Chen Xue and Lu Zhang ()

No 26372, NBER Working Papers from National Bureau of Economic Research, Inc

Abstract: Contradicting Cooper and Haltiwanger (2006), Clementi and Palazzo (2019) report a largely symmetric investment rate distribution in Compustat, with a large fraction of negative investment rates, 18.2%, and conclude “no sign of irreversibility (p. 289).” Their evidence is flawed. A data error on depreciation rates understates gross investment and shifts the whole gross investment rate distribution leftward. Nonstandard sample screens on age and acquisitions further curb its right tail, which is subsequently truncated at 0.2. Fixing these problems restores the heavily asymmetric investment rate distribution with a fat right tail. The fraction of negative investment rates is small, only 4.9%–6.2%.

JEL-codes: E22 E44 G12 G14 G31 (search for similar items in EconPapers)
Date: 2019-10
New Economics Papers: this item is included in nep-bec, nep-cfn, nep-mac and nep-ore
Note: AP CF EFG IFM ME
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Citations: View citations in EconPapers (3)

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