Access to Capital and Investment Composition: Evidence from Fracking in North Dakota

55 Pages Posted: 2 Aug 2018 Last revised: 14 Dec 2018

See all articles by Zack Liu

Zack Liu

University of Houston - Department of Finance

Avishai Schiff

University of Texas at Austin

Nathan Swem

Board of Governors of the Federal Reserve System

Date Written: November 1, 2018

Abstract

We examine the relationship between access to capital and project choice using data from the capital intensive hydraulic fracturing (fracking) industry. The data allow us to distinguish riskier market-expanding projects from investments in proven markets. We find that private firms more intensely invest in the former type of projects, while public firms tilt their investments towards the latter. Furthermore, we find that improving financing conditions for private firms mitigates these differences in investment patterns. Our results are consistent with anecdotal evidence that private firms tend to more aggressively push technological boundaries and suggest that access to financing contributes to this dynamic.

Keywords: Corporate Finance, Access to Capital, Corporate Ownership, Technology

Suggested Citation

Liu, Zack and Schiff, Avishai and Swem, Nathan, Access to Capital and Investment Composition: Evidence from Fracking in North Dakota (November 1, 2018). 14th Annual Mid-Atlantic Research Conference in Finance (MARC). Available at SSRN: https://ssrn.com/abstract=3224515 or http://dx.doi.org/10.2139/ssrn.3224515

Zack Liu (Contact Author)

University of Houston - Department of Finance ( email )

Houston, TX 77204
United States

Avishai Schiff

University of Texas at Austin ( email )

Red McCombs School of Business
Austin, TX 78712
United States

Nathan Swem

Board of Governors of the Federal Reserve System ( email )

20th Street and Constitution Avenue NW
Washington, DC 20551
United States

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