Access to Capital and Investment Composition: Evidence from Fracking in North Dakota
55 Pages Posted: 2 Aug 2018 Last revised: 14 Dec 2018
Date Written: November 1, 2018
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
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