Financial market concentration and misallocation

• 成果类型: Article
• 署名作者: Neuhann, Daniel; Sockin, Michael
• 署名单位: University of Texas System; University of Texas Austin
• 刊物名称: JOURNAL OF FINANCIAL ECONOMICS
• ISSN/ISSBN: 0304-405X
• DOI: 10.1016/j.jfineco.2024.103875
• 发表日期: 2024
• 关键词: Financial market concentration; misallocation; INVESTMENT; liquidity

摘要

How does financial market concentration affect capital allocation? We propose a complete -markets model in which real investment and financial price impact are jointly determined in general equilibrium. We identify a two-way feedback mechanism whereby price impact induces misallocation and misallocation raises price impact. The mechanism is stronger if productivity is low or productivity dispersion is high. Given rising dispersion, the model can rationalize trends in corporate discount rates, cash holdings, investment, asset prices, and capital reallocation over the last two decades, even when market concentration is relatively stable. Overall, our findings suggest that financial market concentration may hamper allocative efficiency.