Reallocation of Tangible Assets and Productivity

Author Name UESUGI Iichiro (Faculty Fellow, RIETI) / HOSONO Kaoru (Faculty Fellow, RIETI) / MIYAKAWA Daisuke (Hitotsubashi University) / ONO Arito (Chuo University) / UCHIDA Hirofumi (Kobe University)
Creation Date/NO. July 2018 18-E-048
Research Project Study Group on Corporate Finance and Firm Dynamics
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We study the reallocation of land and other tangible assets across firms and examine its relationship with productivity. Focusing on Japanese firms during the period 1980-2014, which includes massive asset price fluctuations, we find the following. First, there exists no obvious cyclicality in the extent of land and other tangible asset reallocation. Instead, the reallocation of land has been sluggish for more than 20 years since the burst of the asset price bubble. Second, reallocation of land and non-land tangible assets is efficiency-reducing rather than efficiency-enhancing in that firms with high total factor productivity (TFP) reduced their holdings of these assets more than low TFP firms. Third, the relationship between reallocation and productivity has changed over time. Even though the reallocation of land was efficiency-enhancing around the end of the 1980s, it turned efficiency-reducing afterward.