NATIONAL BUREAU OF ECONOMIC RESEARCH
NATIONAL BUREAU OF ECONOMIC RESEARCH

Matching Capital and Labor

Jonathan B. Berk, Jules H. van Binsbergen, Binying Liu

NBER Working Paper No. 20138
Issued in May 2014, Revised in October 2014
NBER Program(s):   AP   CF   IO

We establish an important role for the firm by studying capital reallocation decisions of mutual fund firms. At least 30% of the value mutual fund managers add can be attributed to the firm's role in efficiently allocating capital amongst its mutual fund managers. We find no evidence of a similar effect when a firm hires managers from another firm. We conclude that an important reason why firms exist is the private information that derives from the firm's ability to better assess the skill of its own employees.

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Document Object Identifier (DOI): 10.3386/w20138

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