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Firm listing status and the investment home bias
Institution:1. Henry B. Tippie College of Business, Department of Finance, University of Iowa, 108 Pappajohn Business Bldg., Iowa City, IA 52242-1994, United States of America;2. Peter T. Paul College of Business and Economics, Department of Accounting and Finance, University of New Hampshire, 10 Garrison Avenue, Durham, NH 03824-2325, United States of America;1. Department of Finance and Economics, Mississippi State University College of Business, Post Office Box 9580, 312K McCool Hall, Mississippi State, MS 39762-9580, United States of America;2. Department of Finance, Banking & Insurance, Appalachian State University Walker College of Business, ASU Post Office Box 32058, 3065 Peacock Hall, Boone, NC 28608, United States of America;1. Wells Fargo Asset Management, United States of America;2. Saint Louis University, United States of America;3. University of Nevada, Reno, United States of America;1. Department of Accounting and Finance, Willie A. Deese College of Business and Economics, North Carolina A&T State University, Greensboro, NC, United States of America;2. RB 239A, Department of Finance, College of Business, Administration Florida International University, Miami, FL 33199, United States of America;3. RB 210, Department of Finance, College of Business Administration, Florida International University, Miami, FL 33199, United States of America
Abstract:Are public firm investment rates more sensitive than private firm rates to new investment opportunities? We offer a new explanation for differences in public and private firm investment sensitivities: investment sensitivities differ because the type of investments favored by firms varies with their listing status. Specifically, we consider the geography of investment opportunities and find that private firms have a much stronger investment home-bias than similar public firms which makes their investment decisions more sensitive to local investment opportunities than public firms. Controlling for local investment opportunities explains four-fifths of the differential sensitivity between public and private firms not explained by more traditional measures of investment opportunities.
Keywords:Listing status  Investment home bias  International finance  Investment sensitivity
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