Corporate Investment and Stock Market Listing: A Puzzle?
New York University - Leonard N. School of Business - Department of Economics
Harvard Business School
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)
July 31, 2014
ECGI - Finance Working Paper
We investigate whether short-termism distorts the investment decisions of stock market listed firms. To do so, we compare the investment behavior of comparable public and privately held firms using a rich new data source on private U.S. firms, assuming for identification that closely held private firms are subject to fewer short-termist pressures. Our results show that compared to private firms, public firms invest less and are less responsive to changes in investment opportunities, especially in industries in which stock prices are most sensitive to earnings news. These findings are consistent with the notion that short-termist pressures distort their investment decisions.
Number of Pages in PDF File: 64
Keywords: Corporate investment; Q theory; Short-termism; Managerial myopia; Managerial incentives; Agency costs; Private companies; IPOs
JEL Classification: D22, D92, G31, G32, G34working papers series
Date posted: May 10, 2010 ; Last revised: August 1, 2014
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