Do Stock Market Cycles affect Unlisted Firms' Investment Activities?

41 Pages Posted: 6 Feb 2020

See all articles by Nhan Le

Nhan Le

Australian National University

Mattias Nilsson

U.S. Securities and Exchange Commission

Yitao Zheng

Australian National University (ANU)

Date Written: January 12, 2020

Abstract

We investigate the impact of stock market cycles on unlisted firms' investment activities. We find that bull markets is associated with increased capital expenditures, new establishments, and employment growth in the unlisted corporate sector, while bear markets is associated with a decrease in these investment activities. The favorable effect takes one year to materialize while the adverse effect takes place contemporaneously. Both effects are transitory and vanish after two years. The effects are stronger for unlisted firms with high capital requirements and facilitated in areas with a dense presence of listed firms. In addition, the magnitude of the effect is attenuated depending on the availability of alternative financing sources such as private equity and bank lending. We also find evidence suggesting stock market cycles partly impact the unlisted firm market through merger and acquisition activities by publicly listed firms.

Keywords: Stock market cycles, Firm growth, Corporate investment, Spillover effects

JEL Classification: E32, G32, O16

Suggested Citation

Le, Nhan and Nilsson, Mattias and Zheng, Yitao, Do Stock Market Cycles affect Unlisted Firms' Investment Activities? (January 12, 2020). Available at SSRN: https://ssrn.com/abstract=3518206 or http://dx.doi.org/10.2139/ssrn.3518206

Nhan Le

Australian National University ( email )

26C Kingsley Street
Acton, Australian Capital Territory 2601
Australia

HOME PAGE: http://https://sites.google.com/a/colorado.edu/nhan-le/

Mattias Nilsson (Contact Author)

U.S. Securities and Exchange Commission ( email )

United States Securities and Exchange Commission
100 F Street NE
Washington, DC 20549
United States

Yitao Zheng

Australian National University (ANU) ( email )

Canberra, Australian Capital Territory 2601
Australia

Here is the Coronavirus
related research on SSRN

Paper statistics

Downloads
23
Abstract Views
166
PlumX Metrics