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Comparing the Investment Behavior of Public and Private Firms

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  • John Asker
  • Joan Farre-Mensa
  • Alexander Ljungqvist

Abstract

We evaluate differences in investment behavior between stock market listed and privately held firms in the U.S. using a rich new data source on private firms. Listed firms invest less and are less responsive to changes in investment opportunities compared to observably similar, matched private firms, especially in industries in which stock prices are particularly sensitive to current earnings. These differences do not appear to be due to unobserved differences between public and private firms, how we measure investment opportunities, lifecycle differences, or our matching criteria. We suggest that the patterns we document are most consistent with theoretical models emphasizing the role of managerial myopia.

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Bibliographic Info

Paper provided by National Bureau of Economic Research, Inc in its series NBER Working Papers with number 17394.

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Date of creation: Sep 2011
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Handle: RePEc:nbr:nberwo:17394

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  1. Alberto Abadie & Guido W. Imbens, 2006. "On the Failure of the Bootstrap for Matching Estimators," NBER Technical Working Papers 0325, National Bureau of Economic Research, Inc.
  2. Acharya, Viral V & Almeida, Heitor & Campello, Murillo, 2005. "Is Cash Negative Debt? A Hedging Perspective on Corporate Financial Policies," CEPR Discussion Papers 4886, C.E.P.R. Discussion Papers.
  3. Arellano, Manuel & Bond, Stephen, 1991. "Some Tests of Specification for Panel Data: Monte Carlo Evidence and an Application to Employment Equations," Review of Economic Studies, Wiley Blackwell, vol. 58(2), pages 277-97, April.
  4. James S. Ang & Rebel A. Cole & James Wuh Lin, 2000. "Agency Costs and Ownership Structure," Journal of Finance, American Finance Association, vol. 55(1), pages 81-106, 02.
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Cited by:
  1. Isil Erel & Yeejin Jang & Michael S. Weisbach, 2013. "Do Acquisitions Relieve Target Firms’ Financial Constraints?," NBER Working Papers 18840, National Bureau of Economic Research, Inc.
  2. Claudio Loderer & René Stulz & Urs Waelchli, 2013. "Limited Managerial Attention and Corporate Aging," NBER Working Papers 19428, National Bureau of Economic Research, Inc.
  3. MIYAKAWA Daisuke & TAKIZAWA Miho, 2013. "Performance of Newly Listed Firms: Evidence from Japanese firm and venture capital data," Discussion papers 13019, Research Institute of Economy, Trade and Industry (RIETI).
  4. Ferrando, Annalisa & Marchica, Maria-Teresa & Mura, Roberto, 2014. "Financial flexibility across the euro area and the UK," Working Paper Series 1630, European Central Bank.
  5. Dominika Langenmayr & Rebecca Lester, 2013. "Taxation and corporate risk-taking," Working Papers 1316, Oxford University Centre for Business Taxation.
  6. Alex Edmans & Vivian W. Fang & Katharina A. Lewellen, 2013. "Equity Vesting and Managerial Myopia," NBER Working Papers 19407, National Bureau of Economic Research, Inc.
  7. Bernstein, Shai, 2012. "Does Going Public Affect Innovation?," Research Papers 2126, Stanford University, Graduate School of Business.
  8. Florian Heider & Alexander Ljungqvist, 2012. "As Certain as Debt and Taxes: Estimating the Tax Sensitivity of Leverage from Exogenous State Tax Changes," NBER Working Papers 18263, National Bureau of Economic Research, Inc.
  9. Hope, Ole-Kristian & Langli, John Christian & Thomas, Wayne B., 2012. "Agency conflicts and auditing in private firms," Accounting, Organizations and Society, Elsevier, vol. 37(7), pages 500-517.
  10. He, Jie (Jack) & Tian, Xuan, 2013. "The dark side of analyst coverage: The case of innovation," Journal of Financial Economics, Elsevier, vol. 109(3), pages 856-878.
  11. Evangelina Dardati & Julio Riutort, 2013. "Financial Constraints and Investment: A Quasi-Experiment in the Electricity Sector," ILADES-Georgetown University Working Papers inv293, Ilades-Georgetown University, Universidad Alberto Hurtado/School of Economics and Bussines.
  12. Erel, Isil & Jang, Yeejin & Weisbach, Michael S., 2012. "Financing-Motivated Acquisitions," Working Paper Series 2012-06, Ohio State University, Charles A. Dice Center for Research in Financial Economics.
  13. Kaoru Hosono & Miho Takizawa & Kenji Uchimoto & Keishi Hachisuka, 2013. "The Funding through Capital Market and Firm Behavior - Decision-making on IPOs, SEOs and Bond Issues and the Post-funding Investments and R&D Activities," Public Policy Review, Policy Research Institute, Ministry of Finance Japan, vol. 9(2), pages 315-364, March.
  14. Waelchli, Urs & Zeller, Jonas, 2013. "Old captains at the helm: Chairman age and firm performance," Journal of Banking & Finance, Elsevier, vol. 37(5), pages 1612-1628.
  15. Davies, Richard & Haldane, Andrew G. & Nielsen, Mette & Pezzini, Silvia, 2014. "Measuring the costs of short-termism," Journal of Financial Stability, Elsevier, vol. 12(C), pages 16-25.
  16. Jason DeBacker & Bradley Heim & Vasia Panousi & Shanthi Ramnath & Ivan Vidangos, 2012. "The properties of income risk in privately held businesses," Finance and Economics Discussion Series 2012-69, Board of Governors of the Federal Reserve System (U.S.).

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