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

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. JEL Codes: G31, G34.
Keywords: Investment, public firms, corporate governance.

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