Abstract

We document how a positive 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, the firm's headquarters withdraws capital and labor from other plants, especially 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 evidence of capital or labor spillovers among plants of financially unconstrained firms.

Download PDF

Citation

Giroud, Xavier, and Holger Mueller. "Capital and Labor Reallocation within Firms." Journal of Finance 70, no. 4 (August 2015): 1767-1804.

Each author name for a Columbia Business School faculty member is linked to a faculty research page, which lists additional publications by that faculty member.

Each topic is linked to an index of publications on that topic.