Journal Article

Corporate Investment and Stock Market Listing: A Puzzle?

John Asker, Joan Farre-Mensa and Alexander Ljungqvist

in The Review of Financial Studies

Published on behalf of The Society for Financial Studies

Volume 28, issue 2, pages 342-390
Published in print February 2015 | ISSN: 0893-9454
Published online October 2014 | e-ISSN: 1465-7368 | DOI: https://dx.doi.org/10.1093/rfs/hhu077
Corporate Investment and Stock Market Listing: A Puzzle?

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  • Production and Organizations
  • Intertemporal Choice and Growth
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We investigate whether short-termism distorts the investment decisions of stock market-listed firms. To do so, we compare the investment behavior of observably similar public and private firms, using a new data source on private U.S. firms and assuming for identification that closely held private firms are subject to fewer short-termist pressures. Our results show that compared with private firms, public firms invest substantially less and are less responsive to changes in investment opportunities, especially in industries in which stock prices are most sensitive to earnings news. These findings are consistent with the notion that short-termist pressures distort investment decisions.

Keywords: D22; D92; G31; G32; G34

Journal Article.  21895 words.  Illustrated.

Subjects: Production and Organizations ; Intertemporal Choice and Growth ; Corporate Governance ; Mergers and Acquisitions

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