Exit, selection, and the value of firms

Abstract

This paper studies a competitive dynamic model with firm level uncertainty and derives implications for the distribution of firm values and Tobin's q. Allowing for entry and exit, the model determines endogenously the degree of selection. A consequence of this selection is that average industry q values are biased above one. As parameters describing the technology and firm level uncertainty are changed, the equilibrium distribution for q values changes. This comparative statics is developed in the paper.

Cite this work

No public copy is stored for this record, so only the metadata is cited.

Stored only when both papers are in the corpus — 116 citations exist upstream.

Papers that cite the same references — the relational fallback while embeddings are still backfilling.