Does Capital Flow More to High Tobin's Q Industries?

Fisher College of Business Working Paper No. 2018-03-008

Charles A. Dice Center Working Paper No. 2018-8

51 Pages Posted: 9 May 2018

See all articles by Dong Wook Lee

Dong Wook Lee

Korea University

Hyun-Han Shin

Yonsei University

René M. Stulz

Ohio State University (OSU) - Department of Finance; National Bureau of Economic Research (NBER); European Corporate Governance Institute (ECGI)

Date Written: May 9, 2018

Abstract

We examine whether capital flows more to high Tobin’s q industries and find that it flows more to high q industries from 1971 until 1996 but not from 1997 to 2014. This change is due to a decrease in the q-sensitivity of equity funding resulting mostly from the increased q-sensitivity of repurchases after 1996. The increase in intangible assets, the aging of American firms, and the impact of the China shock explain much of the change in the q-sensitivity of equity funding and repurchases. The results are robust to how q is estimated and to a non-q measure of growth opportunities.

Keywords: capital markets, investment, industry, equity flows, debt flows, external finance, equity repurchases, Tobin’s q

JEL Classification: G31, G35, E22, E44, L16

Suggested Citation

Lee, Dong Wook and Shin, Hyun-Han and Stulz, Rene M., Does Capital Flow More to High Tobin's Q Industries? (May 9, 2018). Fisher College of Business Working Paper No. 2018-03-008, Charles A. Dice Center Working Paper No. 2018-8, Available at SSRN: https://ssrn.com/abstract=3176187 or http://dx.doi.org/10.2139/ssrn.3176187

Dong Wook Lee

Korea University ( email )

523 Hyundai Motor Hall
Korea University Business School
Seoul, 02841
Korea, Republic of (South Korea)
+82.2.3290.2820 (Phone)
+82.2.3290.1307 (Fax)

Hyun-Han Shin

Yonsei University ( email )

50 Yonsei Ro
Seodaemoon Gu
Seoul
Korea, Republic of (South Korea)
82-2-21235466 (Phone)

HOME PAGE: http://https://ysb.yonsei.ac.kr/faculty.asp?mid=n02&sOpt=&uid=32

Rene M. Stulz (Contact Author)

Ohio State University (OSU) - Department of Finance ( email )

2100 Neil Avenue
Columbus, OH 43210-1144
United States

HOME PAGE: http://www.cob.ohio-state.edu/fin/faculty/stulz

National Bureau of Economic Research (NBER)

1050 Massachusetts Avenue
Cambridge, MA 02138
United States

European Corporate Governance Institute (ECGI)

c/o the Royal Academies of Belgium
Rue Ducale 1 Hertogsstraat
1000 Brussels
Belgium

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