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Understanding US firm efficiency and its asset pricing implications

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journal contribution
posted on 12.11.2019, 09:45 authored by Giovanni CaliceGiovanni Calice, Levent Kutlu, Ming Zeng
We investigate the link between firm-level total factor productivity (TFP) growth, technical efficiency change, and their implications on firm-level stock returns. We estimate total factor productivity growth of US firms between 1966 and 2015 and decompose TFP growth into returns to scale, technical progress, and technical efficiency change components. We show that most of the variation in TFP growth is explained by variation in technical efficiency change. Moreover, we examine the effects of important macro- and micro-level factors on inefficiency as well as its asset pricing implications. We find that low-efficiency firms are more vulnerable to a wide class of aggregate economic shocks, and the well-known five stock return anomalies (Fama and French in J Financ Econ 116(1):1–22, 2015) are more pronounced among those firms. Our results also emphasize the role of macroeconomic determinants of efficiency, and the stability effects of many useful policy targets on firm-level TFP.

History

School

  • Business and Economics

Department

  • Business

Published in

Empirical Economics

Volume

60

Pages

803–827

Publisher

Springer Verlag

Version

AM (Accepted Manuscript)

Rights holder

© Springer Verlag

Publisher statement

This is a post-peer-review, pre-copyedit version of an article published in Empirical Economics. The final authenticated version is available online at: https://doi.org/10.1007/s00181-019-01775-5

Acceptance date

14/09/2019

Publication date

2019-09-25

Copyright date

2021

ISSN

0377-7332

eISSN

1435-8921

Language

en

Depositor

Dr Giovanni Calice Deposit date: 11 November 2019