Publicly traded firms do not have an investment deficit

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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.

That is by Naomi Feldman, et.al., from the Fed.  Via Andrew McAfee and Matt Yglesias.  Of course, this is very much the opposite of what you usually hear from other sources.

The post Publicly traded firms do not have an investment deficit appeared first on Marginal REVOLUTION.

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