Title

Why do U.S. firms invest less over time?

Alternative Title

Are U.S. firms investing less over time?

Publication Type

Conference Paper

Publication Date

10-2016

Abstract

Capital expenditures of U.S. public firms, relative to total assets, decrease by more than a half from 1980 to 2012. The decline is pervasive across industries and firms of different characteristics. The decline is not explained by time variation in industry composition in the economy, firms’ changing investment opportunities or financial conditions, corporate lifecycle, or public listing cohorts. It is related to the widespread transformation of production technology – firms rely more on intangible capital instead of fixed assets in production over the past three decades. As a result, the sensitivity of capital expenditure to investment opportunities decreases. Our examination of the international data suggests that economic globalization also facilitates the transformation of production technology. Our findings reflect a shift in the relative importance of physical and intangible capital in firm production and have important implications for how we think about and measure corporate investment.

Keywords

Corporate investment, capital expenditure, intangible capital, firm production, economic globalization

Discipline

Business | Corporate Finance | Finance and Financial Management

Research Areas

Finance

Publication

Financial Management Association Annual Meeting 2016, August 19-22

Publisher

Elsevier

City or Country

Las Vegas, NV

Additional URL

http://www.fma.org/Vegas/Papers/CAPX_FHW_18Dec2015_FMA.pdf

Comments

Also presented at China International Conference in Finance 2015, July 9-12

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