Do Public Firms Invest Differently than Private Firms? Taking Cues from the Natural Gas Industry
University of Pennsylvania - The Wharton School
September 11, 2015
Journal of Finance, Forthcoming
We study how listing status affects investment behavior. Theory offers competing hypotheses on how listing-related frictions affect investment decisions. We use detailed data on 74,670 individual projects in the U.S. natural gas industry to show that private firms respond less than public firms to changes in investment opportunities. Private firms adjust drilling activity for low capital-intensity investments. However, they do not increase drilling in response to new capital-intensive growth opportunities. Instead, they sell these projects to public firms. Our evidence suggests that differences in access to external capital are important for explaining the investment behavior of public and private firms.
Number of Pages in PDF File: 67
Keywords: Corporate investment, exogenous shock, private, public, natural gas, external capital
JEL Classification: D21, G31, G32
Date posted: March 31, 2012 ; Last revised: October 30, 2015
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