Capital Intensity and the Firm's Cost of Capital
Bibliographic Data
| ID | 19314191 |
|---|---|
| Authors | Frederick H deB Harris (0000-0001-8939-0559, corresponding author) |
| Year | 1988 |
| Volume | 70 |
| Issue | 4 |
| Pages | 587 |
| Publication date | 1988-11-01 |
| Open Access | No |
| Type | ARTICLE |
| Venue | The Review of Economics and Statistics (JOURNAL) |
| Journal identifiers | ISSN: 0034-6535 • E-ISSN: 1530-9142 |
| Publisher | JSTOR (PUBLISHER) |
| DOI | 10.2307/1935821 |
| OpenAlex | W1973890730 |
| Language | EN |
| Citations received | 2 |
| References cited | 6 |
Recent reports of negative capital intensity coefficients in struct ure-performance equations support allegations of gross measurement error in accounting-based measures of economic profitability. This paper explores whether specification errors, rather than measurement errors alone, may explain this anomalous empirical result. Within a simultaneous equations model of capital intensity, cost of capital, and price-cost margins, the author employs Hausman specification tests to demonstrate a negative bias on capital intensity and a positive bias on concentration when one omits firm-specific cost of capital from price-cost margin equations. The roles of cost of capital and capital intensity are derived from formal structure-performance theory. Copyright 1988 by MIT Press
Capital (architecture) · Capital formation · Capital intensity · Cost of capital · Econometrics · Economics · Financial capital · Fixed capital · Incentive · Intensity (physics) · Microeconomics · Monetary economics · Physics · Profitability index · Capital Investment and Risk Analysis · Corporate Finance and Governance · Finance · Financial Reporting and Valuation Research
| Citations per year | 0.07 |
|---|---|
| Citation span | 1999 - 2026 (28) |
| Highly cited | No |