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Firm listing status and the investment home bias

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  • Dougal, Casey
  • Rettl, Daniel A.

Abstract

Are public firm investment rates more sensitive than private firm rates to new investment opportunities? We offer a new explanation for differences in public and private firm investment sensitivities: investment sensitivities differ because the type of investments favored by firms varies with their listing status. Specifically, we consider the geography of investment opportunities and find that private firms have a much stronger investment home-bias than similar public firms which makes their investment decisions more sensitive to local investment opportunities than public firms. Controlling for local investment opportunities explains four-fifths of the differential sensitivity between public and private firms not explained by more traditional measures of investment opportunities.

Suggested Citation

  • Dougal, Casey & Rettl, Daniel A., 2021. "Firm listing status and the investment home bias," Journal of Corporate Finance, Elsevier, vol. 71(C).
    • Handle: RePEc:eee:corfin:v:71:y:2021:i:c:s0929119921002170
    DOI: 10.1016/j.jcorpfin.2021.102095
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