Topic: Production Networks and Stock Returns: The Role of Creative Destruction
Speaker: Youchang Wu, University of Oregon
Time: Wednesday, 6 September, 10:00-11:30
Place: Room 217, Guanghua Building 2
We establish a novel return spread based on the distance between firms and final consumers in a production network. Firms with the longest distance to consumers earn an excess monthly return of 105 basis points relative to final goods producers. We explain this spread quantitatively using a general equilibrium model with multiple layers of production. The driving force behind the spread is creative destruction, which reduces firms’ exposure to productivity shocks. The spread is smaller for firms that belong to supply chains with lower competition. Overall, our results demonstrate a novel effect of creative destruction on firms’ cost of capital.
Dr. Youchang Wu is an Associate Professor of Finance in Lundquist College of Business, University of Oregon. His research has spanned the areas of delegated portfolio management, corporate finance, and asset pricing, with two central themes: 1) The functioning and issues of the asset management industry; 2) The effects of economic fundamentals (including firm characteristics, industry competition, and macroeconomic conditions) on corporate investment/financial decisions and expected stock returns. He holds a B.A. and a M.A. in Economics from Peking University, He holds a Ph.D. in Finance from University of Vienna.
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