Does Finance Flow to High Productivity Firms?
49 Pages Posted: 26 Dec 2018 Last revised: 10 May 2019
Date Written: May 7, 2019
This paper studies the impact of productivity on the flow of financial resources to and from firms. To do this we use machine learning methods (Lasso, XGBoost) to derive a new measure of firm productivity using standard corporate accounts. Output is sales revenue and we find that the key inputs are i) cost of goods sold, ii) selling general and administrative expenses, iii) total assets. Empirically finance typically flows away from high productivity firms. We provide a model to explain this evidenced based on the interactions between investors and firms, in response to transitory
Keywords: productivity, capital structure, financing constraints, machine learning
JEL Classification: D24, E23, G32
Suggested Citation: Suggested Citation