The Utilization Premium

• 成果类型: Article
• 署名作者: Grigoris, Fotis; Segalb, Gill
• 署名单位: Indiana University System; IU Kelley School of Business; Indiana University Bloomington; University of North Carolina; University of North Carolina Chapel Hill
• 刊物名称: MANAGEMENT SCIENCE
• ISSN/ISSBN: 0025-1909
• DOI: 10.1287/mnsc.2022.4647
• 发表日期: 2024
• 关键词: Production; capacity; Utilization; PRODUCTIVITY; asset pricing

摘要

We study the interaction of flexible capital utilization and depreciation for expected returns and investment of firms. Empirically, an investment strategy that buys (sells) equities with low (high) utilization rates earns 5% per annum. Utilization predicts excess returns beyond other production-based variables. We reconcile this novel utilization premium quantitatively using a production model. The model suggests that flexible utilization is important for matching the cross-sectional distribution of investment and stock prices jointly. A model without flexible utilization yields many counterfactuals that flexible utilization addresses by making depreciation fluctuate endogenously. Overall, utilization tightens the link between firms' production and valuations.