Firm Listing Status and the Investment Home Bias

48 Pages Posted: 26 Jul 2019 Last revised: 23 Mar 2020

See all articles by Casey Dougal

Casey Dougal

Florida State University

Daniel A. Rettl

University of Georgia - Department of Banking and Finance

Date Written: July 24, 2019

Abstract

Prior research has found that public firm investment rates are more sensitive than private firm investment rates to new investment opportunities. We confirm these findings and offer a new explanation for this result. Public and private firm investment sensitivities differ because the types of investments favored by firms varies with their listing status. Private firms have a much stronger investment home-bias than similar public firms which makes their investment decisions more sensitive to measures of local, non-industry investment opportunities, but due to resource constraints less sensitive to firm- and industry-measures of investment opportunities. Controlling for both types of investment opportunities explains roughly four-fifths of the differential sensitivity of public and private firms to new investment opportunities.

Keywords: Listing status, Investment home bias, International finance, Investment sensitivity

JEL Classification: D21, D92, G31, G32, G34

Suggested Citation

Dougal, Casey and Rettl, Daniel A., Firm Listing Status and the Investment Home Bias (July 24, 2019). Available at SSRN: https://ssrn.com/abstract=3426143 or http://dx.doi.org/10.2139/ssrn.3426143

Casey Dougal (Contact Author)

Florida State University ( email )

Tallahasse, FL 32306
United States

Daniel A. Rettl

University of Georgia - Department of Banking and Finance ( email )

Terry College of Business
Athens, GA 30602-6253
United States

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