Do public firms invest less than their privately-held peers?

: evidence from European firms

Abstract

The impact of the ownership structure on managerial decisions is a major topic within the corporate finance field. By following two alternative methodologies, this master thesis compares the corporate investment behavior of observably similar privately-held and publicly-traded European companies for the period of 2006 to 2015. The study unveils that unlisted firms do invest more in R&D than their stock market listed peers. Yet, when corporate investment is measured as the annual increase in gross fixed assets instead, the relationship is no longer clear. Still, the impact of the firms’ listing status on corporate investment is much stronger when the latter is measured by R&D expenditures. We, thus, suggest that the legal requirements imposed upon listed enterprises to disclose key financial information are a deterrent for companies whose competitive advantage heavily relies on R&D to go public. The overall attained results are consistent with the agency theory’s view on the impact of short-termism and managerial myopia on public firms’ underinvestment. When considering the European financial crisis’ effect on investment levels, we find that private and public firms are equally affected. Even though it did have an impact on absolute investment levels, the financial crisis seems to have not significantly affected the relative corporate investment behavior of private and public companies. In fact, private enterprises were documented to invest more in R&D than their publicly-listed peers regardless of the period being considered. When gross investment is considered, results vary for the post-crisis period though

Date of Award	18 Oct 2016
Original language	English
Awarding Institution	Universidade Católica Portuguesa
Supervisor	Christophe Moussu (Supervisor)