Delayed Creative Destruction: How Uncertainty Shapes Corporate Assets
The authors show how uncertainty shapes the asset allocation, composition, productivity, and value of capital-intensive firms. The authors do so using detailed, near-universal data on shipping firms’ new orders, secondary-market transactions, and demolition of ships. Firms curtail both the acquisition and disposal of vessels in response to heightened uncertainty. The mechanism operates primarily through cuts in new ship orders and demolition of older ships — decisions that are costlier to reverse vis-à-vis deals in the used ship market. These dynamics are more pronounced when secondary ship markets are illiquid, as firms face stronger incentives to delay their decisions. The rise of Somali pirate attacks in 2009–2011 is used as a shock to well-defined shipping sectors to corroborate the findings. Critically, uncertainty prompts firms to concentrate their fleets into narrower, less productive portfolios, leading to value losses. This work is novel in showing that uncertainty hampers "creative destruction," slowing both the adoption of innovation embodied in new capital and the disposal of old capital.
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Supplemental Notes:
- © 2021 by Murillo Campello, Gaurav Kankanhalli, and Hyunseob Kim.
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Authors:
- Campello, Murillo
- Kankanhalli, Gaurav
- Kim, Hyunseob
- Publication Date: 2021-6
Language
- English
Media Info
- Media Type: Digital/other
- Features: Appendices; Figures; References; Tables;
- Pagination: 70p
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Serial:
- NBER Working Papers
- Issue Number: 28971
- Publisher: National Bureau of Economic Research
Subject/Index Terms
- TRT Terms: Asset management; Decision making; Economic models; Ship lines; Ships; Uncertainty
- Subject Areas: Economics; Freight Transportation; Marine Transportation; Planning and Forecasting; Vehicles and Equipment;
Filing Info
- Accession Number: 01781898
- Record Type: Publication
- Files: TRIS
- Created Date: Sep 20 2021 2:52PM