Creative Destruction and Firm-Specific Volatility

67 Pages Posted: 9 Apr 2005

See all articles by Hyunbae Chun

Hyunbae Chun

Sogang University - Department of Economics

Randall Morck

University of Alberta - Department of Finance and Statistical Analysis; National Bureau of Economic Research (NBER); European Corporate Governence Institute; Asian Bureau of Finance and Economic Research

Jung-Wook Kim

Seoul National University - Graduate School of Business

Jason Lee

University of Alberta

Abstract

We investigate underlying factors that explain increases in the firm-specific volatilities of stock returns and fundamentals. We find that firm-specific volatilities are significantly higher in both manufacturing and non-manufacturing industries that are more information technology (IT) intensive. We hypothesise that IT is associated with creative destruction or product differentiation, either of which can widen the performance difference between winner and loser firms. Our findings are consistent with rising firm-specific volatility in U.S. stocks reflecting an accelerating pace of creative destruction; and with greater firmspecific volatility in richer and faster growing countries reflecting more intensive creative destruction in those economies.

Keywords: Information Technology, Firm-Specific Volatility, Creative Destruction

Suggested Citation

Chun, Hyunbae and Morck, Randall K. and Kim, Jung-Wook and Lee, Jason, Creative Destruction and Firm-Specific Volatility. EFA 2005 Moscow Meetings Paper. Available at SSRN: https://ssrn.com/abstract=701541 or http://dx.doi.org/10.2139/ssrn.701541

Hyunbae Chun

Sogang University - Department of Economics ( email )

Seoul, 121-742
Korea, Republic of (South Korea)
+82-2-705-8515 (Phone)
+82-2-704-8599 (Fax)

HOME PAGE: http://hompi.sogang.ac.kr/hchun/

Randall K. Morck (Contact Author)

University of Alberta - Department of Finance and Statistical Analysis ( email )

2-32C Business Building
Edmonton, Alberta T6G 2R6
Canada
780-492-5683 (Phone)
780-492-3325 (Fax)

National Bureau of Economic Research (NBER)

1050 Massachusetts Avenue
Cambridge, MA 02138
United States

European Corporate Governence Institute ( email )

c/o ECARES ULB CP 114
B-1050 Brussels
Belgium

Asian Bureau of Finance and Economic Research ( email )

BIZ 2 Storey 4, 04-05
1 Business Link
Singapore, 117592
Singapore

Jung-Wook Kim

Seoul National University - Graduate School of Business ( email )

Seoul, 151-742
Korea, Republic of (South Korea)

Jason Lee

University of Alberta ( email )

Edmonton, Alberta T6G 2R6
Canada
780-492-4839 (Phone)
780-492-3325 (Fax)

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