Investor demand, firm investment, and capital misallocation

• 成果类型: Article
• 署名作者: Choi, Jaewon; Tian, Xu; Wu, Yufeng; Kargar, Mahyar
• 署名单位: Seoul National University (SNU); University System of Georgia; University of Georgia; University System of Ohio; Ohio State University; University of Illinois System; University of Illinois Urbana-Champaign
• 刊物名称: JOURNAL OF FINANCIAL ECONOMICS
• ISSN/ISSBN: 0304-405X
• DOI: 10.1016/j.jfineco.2025.104039
• 发表日期: 2025
• 关键词: Investor demand; Firm investment; Capital misallocation; structural estimation; Market timing

摘要

Fluctuations in investor demand significantly affect firms' valuation and access to capital. To quantify their real effects, we develop a dynamic investment model, incorporating both the demand and supply sides of capital. Strong investor demand relaxes financial constraints and facilitates equity issuance and investment, while weak demand encourages opportunistic share repurchases, crowding out investment. We estimate the model using indirect inference, matching the endogenous relationship between investor demand and firm policies. Our estimation reveals that demand fluctuations are important drivers of firm-level investment and economy-wide capital misallocation, accounting for 26.9% of dispersion in MPK and 23.4% of productivity losses.