Corporate Investment and Stock Market Listing: A Puzzle?

53 Pages Posted: 14 Dec 2011 Last revised: 22 Apr 2013

See all articles by John Asker

John Asker

UCLA

Joan Farre-Mensa

University of Illinois at Chicago - Department of Finance

Alexander Ljungqvist

Stockholm School of Economics; Centre for Economic Policy Research (CEPR); European Corporate Governance Institute (ECGI); Research Institute of Industrial Economics (IFN)

Multiple version iconThere are 3 versions of this paper

Date Written: April 22, 2013

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. These differences do not reflect observable economic differences between public and private firms (such as lifecycle differences) and instead appear to be driven by a propensity for public firms to suffer greater agency costs. Evidence showing that investment behavior diverges most strongly in industries in which stock prices are particularly sensitive to current earnings suggests public firms may suffer from managerial myopia.

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

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

Suggested Citation

Asker, John William and Farre-Mensa, Joan and Ljungqvist, Alexander, Corporate Investment and Stock Market Listing: A Puzzle? (April 22, 2013). NYU Working Paper No. FIN-11-016, Available at SSRN: https://ssrn.com/abstract=1972117

John William Asker (Contact Author)

UCLA ( email )

8283 Bunche Hall
Los Angeles, CA 90095-1477
United States

Joan Farre-Mensa

University of Illinois at Chicago - Department of Finance ( email )

2431 University Hall (UH)
601 S. Morgan Street
Chicago, IL 60607-7124
United States

Alexander Ljungqvist

Stockholm School of Economics ( email )

111 60 Stockholm
Sweden

Centre for Economic Policy Research (CEPR)

London
United Kingdom

European Corporate Governance Institute (ECGI)

c/o the Royal Academies of Belgium
Rue Ducale 1 Hertogsstraat
1000 Brussels
Belgium

Research Institute of Industrial Economics (IFN) ( email )

Box 55665
Grevgatan 34, 2nd floor
Stockholm, SE-102 15
Sweden

Here is the Coronavirus
related research on SSRN

Paper statistics

Downloads
136
Abstract Views
1,191
rank
82,943
PlumX Metrics