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Delayed Creative Destruction: How Uncertainty Shapes Corporate Assets

Author

Listed:
  • Murillo Campello
  • Gaurav Kankanhalli
  • Hyunseob Kim

Abstract

We show how uncertainty shapes corporate asset allocation, composition, and productivity using data from the shipping industry. Firms curtail both ship acquisitions and disposals when uncertainty increases, primarily through cuts in new ship orders and ship demolitions—decisions that are costlier to reverse vis-à-vis secondary market transactions. Uncertainty also prompts firms to concentrate their fleets into narrower, less productive portfolios. We corroborate our findings using the 2009-2011 spike in Somali pirate attacks as an uncertainty shock to shipping activity. Uncertainty hampers “creative destruction,” slowing both the adoption of innovation embodied in new capital and the disposal of old capital.

Suggested Citation

  • Murillo Campello & Gaurav Kankanhalli & Hyunseob Kim, 2021. "Delayed Creative Destruction: How Uncertainty Shapes Corporate Assets," NBER Working Papers 28971, National Bureau of Economic Research, Inc.
    • Handle: RePEc:nbr:nberwo:28971
    Note: CF
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    Cited by:

    1. Sultan Kaheel & Khalifa Aliyu Ibrahim & Gasem Fallatah & Venkatasubramanian Lakshminarayanan & Patrick Luk & Zhenhua Luo, 2023. "Advancing Hydrogen: A Closer Look at Implementation Factors, Current Status and Future Potential," Energies, MDPI, vol. 16(24), pages 1-29, December.
    2. Benjamin Collier & Sabrina T. Howell & Lea Rendell, 2024. "After the Storm: How Emergency Liquidity Helps Small Businesses Following Natural Disasters," Working Papers 24-20, Center for Economic Studies, U.S. Census Bureau.
    3. Lanlan Li & Yanlei Gao & Xiudong Wang, 2023. "Impact of Economic Policy Uncertainty on Agribusiness Technology Innovation: Evidence from 231 Listed Firms in China," Sustainability, MDPI, vol. 15(13), pages 1-29, June.
    4. Yu Zhang & Xiaotong Wang & Wei Guo & Xinlei Guo & Qisheng Wang & Xin Tan, 2024. "Does ESG Performance Affect the Enterprise Value of China’s Heavily Polluting Listed Companies?," Sustainability, MDPI, vol. 16(7), pages 1-21, March.

    More about this item

    JEL classification:

    • D22 - Microeconomics - - Production and Organizations - - - Firm Behavior: Empirical Analysis
    • D25 - Microeconomics - - Production and Organizations - - - Intertemporal Firm Choice: Investment, Capacity, and Financing
    • G31 - Financial Economics - - Corporate Finance and Governance - - - Capital Budgeting; Fixed Investment and Inventory Studies

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