Financing and New Product Decisions of Private and Publicly Traded Firms

Forthcoming, Review of Financial Studies

69 Pages Posted: 8 Jul 2014 Last revised: 4 Oct 2016

See all articles by Gordon M. Phillips

Gordon M. Phillips

Dartmouth College - Tuck School of Business; National Bureau of Economic Research (NBER)

Giorgo Sertsios

Universidad de los Andes, Chile

Multiple version iconThere are 2 versions of this paper

Date Written: October 2, 2016

Abstract

We exploit Medicare national coverage reimbursement approvals as a quasi-natural experiment to investigate how the financing decisions of private and publicly traded firms respond to changes in investment opportunities. We find that publicly traded companies increase their external financing, and their subsequent product introductions, by more than private companies in response to national coverage approvals. The primary source of the increased financing is through private equity financing of public firms. We show that the stock characteristics of publicly traded firms, such as liquidity and price informativeness, and product market competition are important factors in explaining their financing advantage.

Keywords: Public vs Private, Financing, Product Introductions, Quasi-Natural Experiment

JEL Classification: G32, G30

Suggested Citation

Phillips, Gordon M. and Sertsios, Giorgo, Financing and New Product Decisions of Private and Publicly Traded Firms (October 2, 2016). Forthcoming, Review of Financial Studies. Available at SSRN: https://ssrn.com/abstract=2463161 or http://dx.doi.org/10.2139/ssrn.2463161

Gordon M. Phillips (Contact Author)

Dartmouth College - Tuck School of Business ( email )

Hanover, NH 03755
United States

National Bureau of Economic Research (NBER)

1050 Massachusetts Avenue
Cambridge, MA 02138
United States

Giorgo Sertsios

Universidad de los Andes, Chile ( email )

Mons. Álvaro del Portillo
Las Condes
Santiago, 12.455
Chile

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