Who Are America's Star Firms?
There is wide spread concern about a growing gap between top-performing publicly listed firms and the rest of the economy and the implications of this for rising inequality in the U.S. Using conventional return calculations, there is indeed a widen...
| Main Authors: | , , |
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| Format: | Working Paper |
| Language: | English |
| Published: |
Washington, DC: World Bank
2018
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| Subjects: | |
| Online Access: | http://documents.worldbank.org/curated/en/109791531501183455/Who-are-Americas-star-firms http://hdl.handle.net/10986/30069 |
| Summary: | There is wide spread concern about a
growing gap between top-performing publicly listed firms and
the rest of the economy and the implications of this for
rising inequality in the U.S. Using conventional return
calculations, there is indeed a widening gap between star
firms (defined as those with top 10 percent of return on
invested capital in any year) and the rest of the economy
over time, especially in industries that rely on a skilled
labor force. However, once measurement error in intangible
capital is accounted for, this gap shrinks dramatically and
has not been widening over time. While pricing power, as
measured by markups, predicts star firm status, a large
fraction of star firms have low markups and there is no
evidence that star firms are cutting output or investment
more than other firms for the same markup. The effect of
star status is persistent. Five years later, star firms have
higher growth, profits, and Tobin's Q. A subset of
exceptional firms may pose more pressing policy concerns
with much higher returns and the potential to exercise
market power in the future. |
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