Finance, Managerial Inputs, and Misallocation

Chaoran Chen, Ashique Habib and Xiaodong Zhu

Working Papers from University of Toronto, Department of Economics

Abstract: n standard macro-finance models, financial constraints mainly affect small or young firms but not large or old ones due to the self-financing mechanism, and the dispersion of marginal revenue product of capital (MRPK) of a firm cohort is less persistent than in the data. We extend a standard model by allowing firms to hire managers and large firms hire disproportionately more managers, consistent with data. In our model, financial constraints and the dispersion of MRPK persist, and even large firms are likely to be constrained. The productivity loss from financial frictions is also substantially amplified.

Keywords: Collateral Constraint; Managerial Inputs; Elasticity of Scale; Misallocation; Aggregate Productivity; China (search for similar items in EconPapers)
JEL-codes: E13 G21 L16 L26 O16 O41 (search for similar items in EconPapers)
Pages: Unknown pages
Date: 2022-11-23
New Economics Papers: this item is included in nep-bec and nep-cfn
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Related works:
Journal Article: Finance, Managerial Inputs, and Misallocation (2023)
Working Paper: FInance, Endogenous TFP, and Misallocation (2021)
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Persistent link: https://EconPapers.repec.org/RePEc:tor:tecipa:tecipa-744

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