Abstract
AbstractThis paper investigates the impact of volatility in profitability shock, capital price distortion and adjustment costs on capital misallocation among Chinese industrial firms. We estimate a dynamic model pertaining firms' investment decision, incorporating institutional differences between state and private firms, so the model can reproduce salient features observed from Chinese firms. Our analysis shows: (i) capital price distortion is more severe among state firms than private ones; (ii) adjusting capital is more costly for state than private firms; (iii) volatility in profitability shock is a major source that causes capital misallocation for both types of firms.
Sign-in/Register to access full text options 
Talk to us
Join us for a 30 min session where you can share your feedback and ask us any queries you have
Schedule a callDisclaimer: All third-party content on this website/platform is and will remain the property of their respective owners and is provided on "as is" basis without any warranties, express or implied. Use of third-party content does not indicate any affiliation, sponsorship with or endorsement by them. Any references to third-party content is to identify the corresponding services and shall be considered fair use under The CopyrightLaw.
