Abstract

http://ssrn.com/abstract=1603484
 
 

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Corporate Investment and Stock Market Listing: A Puzzle?


John Asker


New York University - Leonard N. School of Business - Department of Economics

Joan Farre-Mensa


Harvard Business School

Alexander Ljungqvist


New York University (NYU) - Department of Finance; National Bureau of Economic Research (NBER); Centre for Economic Policy Research (CEPR); European Corporate Governance Institute (ECGI); Research Institute of Industrial Economics (IFN)

January 27, 2014

ECGI - Finance Working Paper

Abstract:     
We document sizeable and surprising 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 substantially less and are less responsive to changes in investment opportunities compared to matched private firms, even during the recent financial crisis. Ex ante differences between public and private firms such as lifecycle differences at most explain a third of the difference in investment behavior. The remainder appears most consistent with a propensity for public firms to suffer greater agency costs. In particular, evidence showing that investment behavior diverges most strongly in industries in which stock prices are particularly sensitive to current earnings news suggests public firms may suffer from managerial myopia.

Number of Pages in PDF File: 60

Keywords: Corporate investment, Q theory, Private companies, Managerial incentives, Agency costs, Short-termism, Managerial myopia, IPOs

JEL Classification: D22, D92, G31, G32, G34

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Date posted: May 10, 2010 ; Last revised: January 28, 2014

Suggested Citation

Asker, John and Farre-Mensa, Joan and Ljungqvist, Alexander, Corporate Investment and Stock Market Listing: A Puzzle? (January 27, 2014). ECGI - Finance Working Paper . Available at SSRN: http://ssrn.com/abstract=1603484 or http://dx.doi.org/10.2139/ssrn.1603484

Contact Information

John William Asker
New York University - Leonard N. School of Business - Department of Economics ( email )
269 Mercer Street
New York, NY 10003
United States
212-998-0062 (Phone)
HOME PAGE: http://pages.stern.nyu.edu/~jasker/
Joan Farre-Mensa
Harvard Business School ( email )
Rock Center 218
Soldiers Field Road
Boston, MA 02163
United States
617-495-6963 (Phone)
HOME PAGE: http://people.hbs.edu/jfarremensa
Alexander Ljungqvist (Contact Author)
New York University (NYU) - Department of Finance ( email )
Stern School of Business
44 West 4th Street, Suite 9-160
New York, NY 10012-1126
United States
212-998-0304 (Phone)
212-995-4220 (Fax)
HOME PAGE: http://pages.stern.nyu.edu/~aljungqv
National Bureau of Economic Research (NBER) ( email )
1050 Massachusetts Avenue
Cambridge, MA 02138
United States
Centre for Economic Policy Research (CEPR)
77 Bastwick Street
London, EC1V 3PZ
United Kingdom
European Corporate Governance Institute (ECGI)
c/o ECARES ULB CP 114
B-1050 Brussels
Belgium
Research Institute of Industrial Economics (IFN) ( email )
Box 55665
Grevgatan 34, 2nd floor
Stockholm, SE-102 15
Sweden
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