Capital and Labor Reallocation within Firms

56 Pages Posted: 2 Feb 2015

See all articles by Xavier Giroud

Xavier Giroud

Columbia Business School - Finance and Economics; National Bureau of Economic Research (NBER); Centre for Economic Policy Research (CEPR)

Holger M. Mueller

New York University (NYU) - Department of Finance; National Bureau of Economic Research (NBER); Centre for Economic Policy Research (CEPR); European Corporate Governance Institute (ECGI)

Multiple version iconThere are 2 versions of this paper

Date Written: January 2015

Abstract

We document how a shock to investment opportunities at one plant (“treated plant”) spills over to other plants within the same firm, but only if the firm is financially constrained. To provide the treated plant with resources, headquarters withdraws capital and labor from other plants, especially from plants that are relatively less productive, not part of the firm’s core industries, and located far away from headquarters. As a result of the resource reallocation, aggregate firm-wide productivity increases. We do not find any evidence of capital or labor spillovers among plants of financially unconstrained firms.

Keywords: Internal Capital Markets

JEL Classification: G31

Suggested Citation

Giroud, Xavier and Mueller, Holger M., Capital and Labor Reallocation within Firms (January 2015). CEPR Discussion Paper No. DP10360, Available at SSRN: https://ssrn.com/abstract=2559281

Xavier Giroud (Contact Author)

Columbia Business School - Finance and Economics ( email )

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HOME PAGE: http://www.columbia.edu/~xg2285/

National Bureau of Economic Research (NBER) ( email )

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Centre for Economic Policy Research (CEPR) ( email )

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Holger M. Mueller

New York University (NYU) - Department of Finance ( email )

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HOME PAGE: http://www.stern.nyu.edu/~hmueller/

National Bureau of Economic Research (NBER) ( email )

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Centre for Economic Policy Research (CEPR)

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European Corporate Governance Institute (ECGI) ( email )

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