Essays on macroeconomics and corporate finance
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Abstract
This dissertation consists of three chapters studying intangibles, firm financing, and macroeconomics. The first chapter documents empirical facts about the rising importance of intangible-intensive firms as well as their distinct characteristics relative to tangible-intensive firms in the US economy. In the second chapter, I build and structurally estimate a two-sector general equilibrium model of heterogeneous firms with financing frictions, and I quantify the aggregate importance of financing frictions. The third chapter empirically examines how firm financing varies with monetary policy.
The first chapter empirically investigates structural change and sectoral heterogeneity in the US economy. Using industry-level investment data from the US Bureau of Economic Analysis, I define intangible-intensive and tangible-intensive sectors. I then document the following facts. First, the value-added share of the intangible-intensive sector has steadily increased relative to that of the tangible-intensive sector, and the fraction of intangible-intensive firms has also increased. Second, the intangible-intensive sector has a larger total factor productivity than the tangible-intensive sector in recent decades, implying potential gains from structural change, but also exhibits larger dispersion in the average product of capital across firms, suggesting possibly more severe within-sector misallocation of capital across firms. Third, financing patterns are significantly different across sectors. Intangible-intensive firms mainly depend on equity financing with less debt and more cash holdings than tangible-intensive firms, consistent with differences in the degree of financing constraints across sectors. These facts imply that, because intangible-intensive firms have become a larger part of the US economy, their characteristics relative to tangible-intensive firms might matter more for the macroeconomic outcomes.
In the second chapter, I develop and estimate a two-sector dynamic general equilibrium model of heterogeneous firms with financing frictions and sectoral heterogeneity, motivated by the empirical evidence introduced in the first chapter. To the standard models of heterogeneous firms with collateral constraints and costly equity issuance, I add capital-specific pledgeability as well as sectoral heterogeneity in intangible intensity, productivity processes, and equity financing frictions. To infer the magnitude of financing constraints by sector, I structurally estimate the model using the simulated method of moments with Compustat data on US public firm financials. The estimation result implies that intangible-intensive firms face more severe financing constraints than tangible-intensive firms, mainly because of low pledgeability of intangible capital. At the sectoral level, financing frictions have a much larger impact on the intangible-intensive sector than the tangible-intensive sector. At the macro level, financing frictions cause significant aggregate losses. Most of the aggregate output loss comes from the intangible-intensive sector, financing frictions mitigate aggregate gains from structural change due to larger aggregate losses from financing frictions, and rising pledgeability of intangible capital can lead to sizable aggregate gains by relaxing collateral constraints facing intangible-intensive firms.
The third chapter, joint with Minseog Kim, empirically investigates how firm financing responds to monetary policy shocks and provide evidence on the equity financing channel of monetary policy. At the aggregate level, although debt issuance is a larger source of external financing than equity issuance in magnitude, equity finance comoves more closely with monetary policy shocks conditioning on aggregate-level controls. At the firm level, the response of firm financing to monetary policy shocks significantly differ depending on firms' intangible intensity or leverage. Following a monetary expansion, firms with more intangible assets or larger leverage issue more equity, while those with less intangible assets or smaller leverage issue more debt. The findings suggest a potentially important role of the equity financing channel of monetary policy, especially for firms that are more constrained in debt financing.