This dissertation consists of three essays on firm finances and macroeconomics. In Chapter 1, I empirically investigate the relationship between firms' financial positions and asset tangibility by drawing on a CRSP/Compustat merged dataset of US public firms from 1987 to 2016. Intangible capital has grown in importance as the US economy has evolved towards service-based and technology-based industries with a decline in the physical capital share. Intangible capital spending is a type of capital expenditure that is not negligible compared to physical capital investment. The key finding of my empirical exercise is that industries and firms with lower average asset tangibility have lower average debt-to-sales ratios and higher average values of distance-to-default both in the long run and short run. Asset tangibility is a proxy for the recovery rate of capital since intangible capital is considered less valuable collateral, so the empirical evidence suggests that the recovery rate of capital is related to borrowing and default.
Chapter 2 structurally estimates the recovery rate of capital, which is difficult to observe in the data, and quantitatively analyzes the aggregate implications of the empirical findings in the previous chapter. The recovery rate of capital determines lenders' credit supply and affects the demand and total credit amounts in equilibrium. Recent rising intangibles in the US may reduce recovery. I build a canonical quantitative general equilibrium heterogeneous firm model with risky debt, capital accumulation, and default. I estimate the model parameters by matching the covariance matrix of profit, investment, and debt, the average spread, and the average default rate in my data sample. The simulated method of moments (SMM) estimate of the recovery rate is 74% when targeting moments constructed with only physical capital. The counterfactuals reveal that declines in the recovery rate reduce aggregate output, credit, and welfare by constraining capital accumulation. Tackling intangibles by a broader notion of capital, I estimate a recovery rate of 46% with the same model structure, implying that rising intangibles could cause nontrivial output and welfare losses due to financial frictions.
Chapter 3 examines the causal effect of immigration on local entrepreneurship in US counties. I use the immigration shock constructed in Burchardi et al. (2020) as an instrumental variable to predict the total number of migrants flowing into each US county from 1990 to 2010. I use the entrepreneurship indices from the Startup Cartography Project (Andrews et al., 2020) to measure the quantity and quality of US start-ups at the county-level. First, I find a strong and significant causal impact of immigration on the number of new business registrants per person. Second, I find a significant causal impact of immigration on the expected number of start-ups with growth per person. I also show that the influx of immigrants can increase the local average wage per capita. To interpret these empirical findings, I build a model of entrepreneurship which implies that if immigration shifts the distribution of entrepreneurial acumen to the right, it increases the wage rate, the fraction of entrepreneurs, and the mean quality of entrepreneurs. These results suggest that immigration is an essential driver of economic dynamism via entrepreneurship.
| Identifer | oai:union.ndltd.org:bu.edu/oai:open.bu.edu:2144/45496 |
| Date | 21 January 2023 |
| Creators | Ye, Guangzhi |
| Contributors | Terry, Stephen J. |
| Source Sets | Boston University |
| Language | en_US |
| Detected Language | English |
| Type | Thesis/Dissertation |
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