Why do U.S. firms invest less over time?

• Main Authors: FU, Fangjian, HUANG, Sheng, WANG, Rong
• Format: text
• Language: English
• Published: Institutional Knowledge at Singapore Management University 2022
• Subjects: Corporate investment; Capital expenditure; Intangible capital; Firm production; Economic globalization; Finance; Finance and Financial Management
• Online Access: https://ink.library.smu.edu.sg/lkcsb_research/7120; https://ink.library.smu.edu.sg/context/lkcsb_research/article/8119/viewcontent/1_s2.0_S0927539822000603_main.pdf
• Institution: Singapore Management University

Capital expenditures of U.S. public firms, relative to total assets, decrease by more than half from 1980 to 2020. The decline is pervasive across industries and firms of different characteristics and cannot be explained by the usual determinants of investment and many other seemingly plausible reasons. The decline is consistent with the transformation in production technology — firms rely more on intangible capital and less on fixed assets in production. Industry-level analyses yield supporting evidence. We observe similar declining trend in capital expenditure in other developed countries but not in most emerging markets.