The Journal of Finance publishes leading research across all the major fields of finance. It is one of the most widely cited journals in academic finance, and in all of economics. Each of the six issues per year reaches over 8,000 academics, finance professionals, libraries, and government and financial institutions around the world. The journal is the official publication of The American Finance Association, the premier academic organization devoted to the study and promotion of knowledge about financial economics.
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Excess Capacity, Marginal q, and Corporate Investment
Published: 03/11/2025 | DOI: 10.1111/jofi.13439
GUSTAVO GRULLON, DAVID L. IKENBERRY
Theory posits that when managers anticipate excess capacity, average q becomes a biased estimator of marginal q as the potential for underutilizing new capital reduces the marginal benefit of investing. After correcting for this source of measurement error, the explanatory power of Tobin's q substantially improves in time‐series and cross‐sectional regressions as well as in out‐of‐sample tests. These findings, together with a secular erosion in capacity utilization, help explain why corporate investment rates have been declining for decades despite average q increasing significantly. Our analysis indicates that economic rigidities have contributed to the persistent erosion in capacity utilization.
Book Reviews
Published: 03/31/2007 | DOI: 10.1111/1540-6261.00091
David L. Ikenberry, Brad M. Barber
Zvi Bodie and Robert C. Merton, Finance.
The Long‐Run Negative Drift of Post‐Listing Stock Returns
Published: 12/01/1995 | DOI: 10.1111/j.1540-6261.1995.tb05188.x
BALA G. DHARAN, DAVID L. IKENBERRY
After firms move trading in their stock to the American or New York Stock Exchanges, stock returns are generally poor. Although many listing firms issue equity around the time of listing, post‐listing performance is not entirely explained by the equity issuance puzzle. Similar to the conclusions regarding other long‐run phenomena, poor post‐listing performance appears related to managers timing their application for listing. Managers of smaller firms, where initial listing requirements may be more binding, tend to apply for listing before a decline in performance. Poor post‐listing performance is not observed in larger firms.