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Long‐Term Attachments and Long‐Run Firm Rates of Return
Author(s) -
Orazem Peter F.,
Bouillon Marvin L.,
Doran Benjamin M.
Publication year - 2004
Publication title -
southern economic journal
Language(s) - English
Resource type - Journals
SCImago Journal Rank - 0.762
H-Index - 58
eISSN - 2325-8012
pISSN - 0038-4038
DOI - 10.1002/j.2325-8012.2004.tb00642.x
Subject(s) - human capital , capital call , labour economics , business , term (time) , profit (economics) , return on assets , return on capital employed , economics , monetary economics , microeconomics , finance , financial capital , profitability index , market economy , individual capital , capital formation , physics , quantum mechanics
Long‐term attachments between workers and firms are common. Numerous studies have examined worker returns to tenure, but little is known of firm returns to firm‐worker matches. Yet these attachments represent a human capital asset quasi‐held by the firm, which is not captured by traditional accounting measures of firm assets. Firms with large quasi‐holdings of human capital will have higher measured return on assets, other things equal. Analysis of data on 250 large manufacturing firms supports the view that firms profit from long‐term attachments with their workers. Consequently, unmeasured human capital assets contribute to the explanation of persistence in measured long‐run excess profits across firms.