Corpus ID: 5743918

Management power , corporate performance , and over / underinvestment

  title={Management power , corporate performance , and over / underinvestment},
  author={Walter Dolde and D. Mishra and Walter Dolde},
We investigate whether managers overor underinvest by generalizing a model of Dybvig and Warachka (2012) to allow variation in the ratio of output to capital stock, variation in the unit cost of goods sold, and the possibility of pure competition as s market structure. Through an iterative empirical procedure we estimate the industry-adjusted capital stock that minimizes average cost. More than 95 percent of firms underinvest relative to the optimal capital stock. Estimates of models for… Expand

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