Capital Markets and Short-Termism: Evidence from the Investment Behavior of Public and Private Firms.

65 Pages Posted: 11 Jun 2021 Last revised: 30 May 2023

See all articles by Olga Bogachek

Olga Bogachek

Free University of Bolzano - Faculty of Economics and Management

Massimiliano Bonacchi

Free University of Bolzano - Faculty of Economics and Management; Stern School of Business, New York University

Paul Zarowin

New York University (NYU) - Department of Accounting

Date Written: June 10, 2021

Abstract

We study the net effect of capital market forces on investment decisions. By comparing public and private European firms in countries with different institutional infrastructures, we show that short-termism does not dominate in the investment decisions of listed firms. Additionally, the degree to which public markets encourage investment varies positively with countries’ institutional quality. We reconcile the differences between EU and large sample U.S. results by showing that private firms that are more successful and raising external capital to fund investment are likely to be over-represented in Sageworks’ US private firm data.

Keywords: capital market short-termism, private firms, investment opportunity, legal institutional infrastructure, investor protection

JEL Classification: D22, G15, G31, G32, K22, M41

Suggested Citation

Bogachek, Olga and Bonacchi, Massimiliano and Zarowin, Paul, Capital Markets and Short-Termism: Evidence from the Investment Behavior of Public and Private Firms. (June 10, 2021). NYU Stern School of Business Forthcoming, Available at SSRN: https://ssrn.com/abstract=3864212 or http://dx.doi.org/10.2139/ssrn.3864212

Olga Bogachek

Free University of Bolzano - Faculty of Economics and Management ( email )

Italy

Massimiliano Bonacchi (Contact Author)

Free University of Bolzano - Faculty of Economics and Management ( email )

Universitätsplatz, 1
Bozen-Bolzano, BZ 39100
Italy
+39 0471 013290 (Phone)

HOME PAGE: http://www.unibz.it/en/economics/people/StaffDetails.html?personid=35968&hstf=35968

Stern School of Business, New York University ( email )

40 West 4th Street
Suite 9-160
New York, NY NY 10012
United States

HOME PAGE: http://www.stern.nyu.edu/faculty/bio/massimiliano-bonacchi

Paul Zarowin

New York University (NYU) - Department of Accounting ( email )

40 West 4th Street, Suite 400
422 Tisch Hall
New York, NY 10012-1118
United States
212-998-0015 (Phone)
212-995-4004 (Fax)

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