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Financial Dependence and Innovation: The Case of Public versus Private Firms

59 Pages Posted: 2 Dec 2013 Last revised: 1 Oct 2015

Viral V. Acharya

New York University - Leonard N. Stern School of Business; Centre for Economic Policy Research (CEPR); National Bureau of Economic Research (NBER); New York University (NYU) - Department of Finance

Zhaoxia Xu

UNSW Australia Business School, School of Banking and Finance

Multiple version iconThere are 3 versions of this paper

Date Written: April 7, 2015

Abstract

In this paper, we examine the relation between innovation and a firm's financial dependence using a sample of privately-held and publicly-traded U.S. firms. We find that public firms in external finance dependent industries spend more on R&D and generate a better patent portfolio than their private counterparts, while public firms in internal finance dependent industries do not have a better innovation profile than private firms. The results are robust to various empirical strategies that address selection bias. The findings indicate that the influence of public listing on innovation depends on the need for external capital.

Keywords: Private Firms, Public Firms, Innovation, R&D, Finance and Growth, Financial Constraints

JEL Classification: G31, G32, O30, Ol6

Suggested Citation

Acharya, Viral V. and Xu, Zhaoxia, Financial Dependence and Innovation: The Case of Public versus Private Firms (April 7, 2015). Journal of Financial Economics (JFE), Forthcoming; European Corporate Governance Institute (ECGI) - Finance Working Paper No. 400/2014. Available at SSRN: https://ssrn.com/abstract=2361830 or http://dx.doi.org/10.2139/ssrn.2361830

Viral Acharya

New York University - Leonard N. Stern School of Business ( email )

44 West 4th Street
New York, NY NY 10012
United States

HOME PAGE: http://pages.stern.nyu.edu/~sternfin/vacharya/public_html/~vacharya.htm

Centre for Economic Policy Research (CEPR)

77 Bastwick Street
London, EC1V 3PZ
United Kingdom

National Bureau of Economic Research (NBER)

1050 Massachusetts Avenue
Cambridge, MA 02138
United States

New York University (NYU) - Department of Finance

Stern School of Business
44 West 4th Street
New York, NY 10012-1126
United States

Zhaoxia Xu (Contact Author)

UNSW Australia Business School, School of Banking and Finance ( email )

Sydney, NSW 2052
Australia

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