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The Supply Theory of Value

Asymmetric Investment Rates

4/11/2022

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We have just completed a massive empirical paper "Asymmetric investment rates" (Bai, Li, Xue, and Zhang 2022), with 128 pages short. The main data work is to construct firm-specific current-cost capital stocks (the replacement costs) for the entire Compustat sample.

The headline result is that the firm-level current-cost investment rate distribution is heavily right-skewed, with a small fraction of negative investment rates, 5.51%, but a huge fraction of positive investment rates, 91.64%.

The histogram below (Figure 4 in our paper) shows that the firm-level asymmetry is comparable with, if not more impressive than, the Cooper-Haltiwanger (2006) plant-level evidence (their Figure 1).
Picture

I've also put some slides together for my upcoming keynote at the 2022 Financial Markets and Corporate Governance Conference (FMCG) organized by Monash Business School.


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    Lu Zhang

    A financial economist

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