Investment differences between public and private firms: Evidence from U.S. tax returns

Naomi Feldman, Laura Kawano, Elena Patel, Nirupama Rao, Michael Stevens, Jesse Edgerton

Research output: Contribution to journalArticlepeer-review

5 Scopus citations

Abstract

Using tax data, we compare the investment behavior of public and private firms for a representative sample of all U.S. corporations. We find that while both types of firms invest similarly in physical capital, public firms out-invest private firms in R&D. Compared to observationally-similar private firms, public firms invest roughly 50% more in R&D relative to their asset bases. Further, public firms dedicate 7.4 percentage points more of their investments to R&D than private firms. This stronger public firm R&D investment is muted when shareholder earnings pressures are heightened, but not so much as to overcome the baseline investment advantage.

Original languageEnglish
Article number104370
JournalJournal of Public Economics
Volume196
DOIs
StatePublished - 1 Apr 2021
Externally publishedYes

Keywords

  • Corporate governance
  • Investment
  • Public firms

ASJC Scopus subject areas

  • Finance
  • Economics and Econometrics

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