The Review of Economics and Statistics Vol. 70 No. 4 1988
Investment Activity and the Exit Decision
Abstract
Using level data from the U.S. steel industry, this paper tests and finds support for the hypothesis that firms in a contracting industr y first disinvest from, and then close, their high-cost plants. An investment decision model is estimated using a panel data set composed of the major replacement investments made in forty-three steel plants during the years 1960-81. The results indicate that the firms disinvested from those plants are least likely to remain profitable in an environment of strong competition from imports, minimills, and stagnating domestic demand.
- DOI
- 10.2307/1935822
- Volume
- 70
- Issue
- 4
- Pages
- 595
- Sources
- crossref openalex