How Well is Productivity Being Priced?
Journal of Economics and Finance
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.
Recommended CitationBalasubramanyan, Lakshmi and Mohan, Ramesh, "How Well is Productivity Being Priced?" (2010). Economics Faculty Journal Articles. Paper 24.