Corporate Investment and Stock Market Listing: A Puzzle?

• DOI: 10.1093/rfs/hhu077
• Publication Date: 2015-01-09T01:05:22Z
• Authors: John Asker; Joan Farre-Mensa; Alexander Ljungqvist
• Keywords: Listing (finance); Stock (firearms); Investment; Investment Decisions

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