The Long and Short of It: Do Public and Private Firms Invest Differently?

Jesse Edgerton, Naomi Feldman, Laura Kawano, Elena Patel, Nirupama Rao and Michael Stevens

No 2018-068, Finance and Economics Discussion Series from Board of Governors of the Federal Reserve System (U.S.)

Abstract: 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 (search for similar items in EconPapers)
JEL-codes: G31 G34 (search for similar items in EconPapers)
Pages: 48 pages
Date: 2018-09-28
New Economics Papers: this item is included in nep-cfn
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Citations: View citations in EconPapers (3)

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Persistent link: https://EconPapers.repec.org/RePEc:fip:fedgfe:2018-68

DOI: 10.17016/FEDS.2018.068

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