Financial Frictions and Investment Dynamics in Multi-Plant Firms

32 Pages Posted: 26 Jan 2014

See all articles by Matthias Kehrig

Matthias Kehrig

Duke University; National Bureau of Economic Research (NBER); Centre for Economic Policy Research (CEPR)

Nicolas Vincent

HEC Montreal - Institute of Applied Economics

Date Written: November 1, 2013

Abstract

Using confidential Census data on U.S. manufacturing plants, we document that most of the dispersion in investment rates across plants occurs within firms instead of across firms. Between firm dispersion is almost acyclical, but within-firm dispersion is strongly procyclical. To investigate the role of firms 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 financing constraints at the level of the firm 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

JEL Classification: E2, G3

Suggested Citation

Kehrig, Matthias and Vincent, Nicolas, Financial Frictions and Investment Dynamics in Multi-Plant Firms (November 1, 2013). US Census Bureau Center for Economic Studies Paper No. CES-WP-56, Available at SSRN: https://ssrn.com/abstract=2377493 or http://dx.doi.org/10.2139/ssrn.2377493

Matthias Kehrig (Contact Author)

Duke University ( email )

237 Social Sciences
Box 90097
Durham, NC 27708-0097
United States

HOME PAGE: http://sites.google.com/site/matthiaskehrig/research

National Bureau of Economic Research (NBER) ( email )

1050 Massachusetts Avenue
Cambridge, MA 02138
United States

Centre for Economic Policy Research (CEPR) ( email )

London
United Kingdom

Nicolas Vincent

HEC Montreal - Institute of Applied Economics ( email )

3000, ch. de la Côte-Ste-Catherine
Montréal, Quebec H3T 2A7
Canada

Do you have a job opening that you would like to promote on SSRN?

Paper statistics

Downloads
400
Abstract Views
1,871
rank
88,745
PlumX Metrics