The Long and Short of It: Do Public and Private Firms Invest Differently?
50 Pages Posted: 5 Oct 2018
Date Written: 2018-09-28
Using data from U.S. corporate tax returns, which provide a sample representative of the universe of U.S. corporations, we investigate the differential investment propensities of public and private firms. Re-weighting the data to generate observationally comparable sets of public and private firms, we find robust evidence that public firms invest more overall, particularly in R&D. Exploiting within-firm variation in public status, we find that firms dedicate more of their investment to R&D following IPO, and reduce these investments upon going private. Our findings suggest that public stock markets facilitate greater investment, on average, particularly in risky, uncollateralized investments.
Keywords: Corporate governance, Investment, Public firms
JEL Classification: G34, G31
Suggested Citation: Suggested Citation