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Does Stock Market Listing Boost or Impede Corporate Investment?

Author

Listed:
  • Ibrahim Yarba
  • Ahmet Duhan Yassa

Abstract

This paper investigates investment behavior across public and privately held firms using a novel firm-level dataset. We use coarsened exact matching to construct a control group of firms with which we compare listed firms before and after listing in a difference-in-differences framework. Results reveal that stock market listing spurs growth significantly in terms of sales, employment and assets for manufacturing firms. Furthermore, results indicate that manufacturing listed firms invest more than their non-listed counterparts. In addition, their investment decisions are significantly more sensitive to changes in investment opportunities, and they respond more aggressively. These results constitute a rejecting evidence against existence of short-termism for manufacturing listed firms in Turkey. Moreover, these findings provide significant support for the arguments regarding the advantages of public firms in terms of better access to external finance and enhanced corporate structure, which enables them to fulfill growth potential much easily, and highlight the importance of policies that should be implemented to deepen the Turkish capital markets.

Suggested Citation

  • Ibrahim Yarba & Ahmet Duhan Yassa, 2021. "Does Stock Market Listing Boost or Impede Corporate Investment?," Working Papers 2112, Research and Monetary Policy Department, Central Bank of the Republic of Turkey.
    • Handle: RePEc:tcb:wpaper:2112
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    File URL: https://www.tcmb.gov.tr/wps/wcm/connect/EN/TCMB+EN/Main+Menu/Publications/Research/Working+Paperss/2021/21-12
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    More about this item

    Keywords

    Stock market listing; Corporate investment; Firm growth; Short-termism; Coarsened exact matching; Difference-in-differences;
    All these keywords.

    JEL classification:

    • C23 - Mathematical and Quantitative Methods - - Single Equation Models; Single Variables - - - Models with Panel Data; Spatio-temporal Models
    • D22 - Microeconomics - - Production and Organizations - - - Firm Behavior: Empirical Analysis
    • G31 - Financial Economics - - Corporate Finance and Governance - - - Capital Budgeting; Fixed Investment and Inventory Studies
    • G32 - Financial Economics - - Corporate Finance and Governance - - - Financing Policy; Financial Risk and Risk Management; Capital and Ownership Structure; Value of Firms; Goodwill
    • L25 - Industrial Organization - - Firm Objectives, Organization, and Behavior - - - Firm Performance

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