Title

How Well is Productivity Being Priced?

Document Type

Article

Comments

Published by Springer Science & Business Media B.V. in the Journal of Economics and Finance, volume 34 issue 4, 2010. Bryant users may access this article here.

Publication Source

Journal of Economics and Finance

Abstract

By understanding how productivity shocks affect firm value, an entrepreneur can better compute the risk premium associated with uncertainty in production. This study explores the link between plant-level productivity and firm value for the baking and confectionary sector. From the impulse response analysis, the study finds that there is a lag in the firm's response to productivity shocks at the plant level. Further, the paper employs Tobin's Q as a valuation metric that acts as a link between a firm's manufacturing plant productivity and firm value. Empirical estimations indicate that there is comovement between firm valuation and plant level productivity.