Berk, Jonathan BBinsbergen, Jules H. vanLiu, Binying2023-05-222019-06-222017-08-282017-08-30https://repository.upenn.edu/handle/20.500.14332/34454We establish an important role for the firm by studying capital reallocation decisions of mutual fund firms. The firm's decision to reallocate capital among its mutual fund managers adds at least $474,000 a month, which amounts to over 30% of the total value added of the industry. We provide evidence that this additional value added results from the firm's private information about the skill of its managers. The firm captures this value because investors reward the firm following a capital reallocation decision by allocating additional capital to the firm's funds.This is the peer reviewed version of the following article: BERK, J. B., van BINSBERGEN, J. H. and LIU, B. (2017), Matching Capital and Labor. THE JOURNAL OF FINANCE. doi:10.1111/jofi.12542. This article may be used for non-commercial purposes in accordance with Wiley Terms and Conditions for Self-Archiving [http://olabout.wiley.com/WileyCDA/Section/id-820227.html#terms]Finance and Financial ManagementArticle