Matching Capital and Labor
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.
We thank Anat Admati, Peter DeMarzo, Francisco Perez-Gonzalez, Paul Pfleiderer, Anamaria Pieschacon and Michael Roberts for helpful comments and suggestions. The views expressed herein are those of the authors and do not necessarily reflect the views of the National Bureau of Economic Research.
JONATHAN B. BERK & JULES H. van BINSBERGEN & BINYING LIU, 2017. "Matching Capital and Labor," The Journal of Finance, vol 72(6), pages 2467-2504. citation courtesy of