Working Paper: NBER ID: w17394
Authors: John Asker; Joan Farre-Mensa; Alexander Ljungqvist
Abstract: We evaluate differences in investment behavior between stock market listed and privately held firms in the U.S. using a rich new data source on private firms. Listed firms invest less and are less responsive to changes in investment opportunities compared to observably similar, matched private firms, especially in industries in which stock prices are particularly sensitive to current earnings. These differences do not appear to be due to unobserved differences between public and private firms, how we measure investment opportunities, lifecycle differences, or our matching criteria. We suggest that the patterns we document are most consistent with theoretical models emphasizing the role of managerial myopia.
Keywords: Investment Behavior; Public Firms; Private Firms; Agency Problems
JEL Codes: D21; D92; G31; G32; G34
Edges that are evidenced by causal inference methods are in orange, and the rest are in light blue.
| Cause | Effect |
|---|---|
| Firm Type (Public) (L20) | Investment Level (4%) (G31) |
| Firm Type (Private) (L26) | Investment Level (10%) (G31) |
| Firm Type (Private) (L26) | Responsiveness to Investment Opportunities (3.5 times) (G31) |
| Firm Type (Public) (L20) | Responsiveness to Investment Opportunities (G31) |
| Tax Shock (H26) | Investment Level (Private) (F21) |
| Tax Shock (H26) | Investment Level (Public) (H54) |
| Investment Behavior Differences (G40) | Agency Problems (G34) |