Production Networks and Stock Returns: The Role of Vertical Creative Destruction

• 成果类型: Article
• 署名作者: Gofman, Michael; Segal, Gill; Wu, Youchang
• 署名单位: University of Rochester; University of North Carolina; University of North Carolina Chapel Hill; University of Oregon
• 刊物名称: REVIEW OF FINANCIAL STUDIES
• ISSN/ISSBN: 0893-9454
• DOI: 10.1093/rfs/hhaa034
• 发表日期: 2020
• 页码: 5856
• 关键词: cross-section; long-run; asset returns; INVESTMENT; RISK; predictability; shocks; MODEL

摘要

We examine empirically and theoretically the relation between firms' risk and distance to consumers in a production network. We document two novel facts: firms farther away from consumers have higher risk premiums and higher exposure to aggregate productivity. We quantitatively explain these findings using a general equilibrium model featuring a multilayer production process. The economic force is vertical creative destruction, that is, positive productivity shocks to suppliers devalue customers' assets-in-place, thereby lowering the cyclicality of downstream firms' values. We show that vertical creative destruction varies with competition and firm characteristics and generates sizable cross-sectional differences in risk premiums.