scholarly journals Regulatory Costs of Being Public: Evidence from Bunching Estimation

2020 ◽  
Author(s):  
Michael Ewens ◽  
Kairong Xiao ◽  
Ting Xu
Keyword(s):  
Revealed Preference ◽  
Private Firms ◽  
Compliance Cost ◽  
Internal Governance ◽  
Public Firms ◽  
Estimation Strategy ◽  
Regulatory Costs ◽  
Public Firm ◽  
Public Evidence ◽  
Total Compliance

Many disclosure and internal governance regulations for U.S. public firms trigger when a firm’s public float exceeds a threshold. Consistent with firms seeking to avoid costly regulation, we document significant bunching around multiple regulatory thresholds introduced from 1992 to 2012. We present a revealed preference estimation strategy that uses this behavior to quantify regulatory costs. Our estimates show that various disclosure and internal governance rules leads to a total compliance cost of 4.3% of the market capitalization for a median U.S. public firm. We apply the estimated costs to firms’ public-private choice and show that regulatory costs significantly impact private firms’ decisions to go public, while have limited effects on public firms’ decisions to go private.

Do Public and Private Firms Behave Differently? An Examination of Investment in the Chemical Industry

2019 ◽  
Vol 55 (8) ◽  
pp. 2530-2554 ◽  
Author(s):  
Albert Sheen
Keyword(s):  
Chemical Industry ◽  
Agency Problems ◽  
Private Firms ◽  
Demand Shock ◽  
Public And Private ◽  
Public Firms ◽  
Commodity Chemicals ◽  
Public Firm ◽  
And Control ◽  
The U.S

I compare the U.S. capacity expansion decisions of public and private producers of 7 commodity chemicals from 1989 to 2006. I find that private firms invest differently than public firms. Private firms are more likely than public firms to increase capacity prior to a positive demand shock (an increase in price and quantity) and less likely to increase capacity before a negative demand shock. Potential mechanisms include public firm overextrapolation of past demand shocks and agency problems arising from greater separation between ownership and control.

What Drove the Increase in Idiosyncratic Volatility during the Internet Boom?

2010 ◽  
Vol 45 (5) ◽  
pp. 1253-1278 ◽  
Author(s):  
Jason Fink ◽  
Kristin E. Fink ◽  
Gustavo Grullon ◽  
James P. Weston
Keyword(s):  
Investor Sentiment ◽  
Idiosyncratic Risk ◽  
Idiosyncratic Volatility ◽  
The Internet ◽  
Present Evidence ◽  
Public Firms ◽  
Specific Risk ◽  
Increasing Trend ◽  
Public Firm ◽  
Firm Maturity

AbstractAggregate idiosyncratic volatility spiked nearly fivefold during the Internet boom of the late 1990s, dwarfing in magnitude a moderately increasing trend. While some researchers argue that this rise in idiosyncratic risk was the result of changes in the characteristics of public firms, others argue that it was driven by the changing sentiment of irrational traders. We present evidence that the marketwide decline in maturity of the typical public firm can explain most of the increase in firm-specific risk during the Internet boom. Controlling for firm maturity, we find no evidence that investor sentiment drives idiosyncratic risk throughout the Internet boom.

International Tariffs in a Mixed Oligopoly with Research Spillovers

2016 ◽  
Vol 22 (3) ◽  
pp. 277-293
Author(s):  
Shoji Haruna ◽  
Rajeev K. Goel
Keyword(s):  
Industrial Organization ◽  
Research And Development ◽  
Technical Change ◽  
Large Range ◽  
Policy Implications ◽  
Mixed Oligopoly ◽  
Private Firms ◽  
Second Stage ◽  
Public Firm ◽  
Mixed Oligopolies

AbstractThis paper merges three strands of the literature – industrial organization, international trade, and economics of technical change – to examine the effect of tariffs on international mixed oligopolies which conduct research and development (R&D) that is prone to spillovers. Mixed oligopolies are prevalent in the defense sector, among other sectors. Using a two-stage sequential game with R&D in the first stage and production in the second stage, results show that higher tariffs reduce outputs of both the domestic public firm and foreign private firms, and private R&D. Effects on domestic R&D and welfare, and profits of foreign private firms depend upon spillovers. Within a large range of research spillovers, higher tariffs can in fact lower welfare. Some of these findings are different from traditional oligopolies and from models that ignore research spillovers. Policy implications are discussed.

scholarly journals Innovation Strategy of Private Firms

2017 ◽  
Vol 53 (1) ◽  
pp. 1-32 ◽  
Author(s):  
Huasheng Gao ◽  
Po-Hsuan Hsu ◽  
Kai Li
Keyword(s):  
New Technology ◽  
Equity Markets ◽  
Life Cycles ◽  
Innovation Strategy ◽  
Private Firms ◽  
Investment Horizon ◽  
Public And Private ◽  
Public Firms ◽  
Innovation Strategies ◽  
Public Equity

We compare innovation strategies of public and private firms based on a large sample over the period 1997–2008. We find that public firms’ patents rely more on existing knowledge, are more exploitative, and are less likely in new technology classes, while private firms’ patents are broader in scope and more exploratory. We investigate whether these strategies are due to differences in firm information environments, CEO risk preferences, firm life cycles, corporate acquisition policies, or investment horizons between these two groups of firms. Our evidence suggests that the shorter investment horizon associated with public equity markets is a key explanatory factor.

State ownership and firm profitability in emerging markets

2018 ◽  
Vol 31 (2) ◽  
pp. 167-183 ◽  
Author(s):  
Mouna Ben Rejeb Attia ◽  
Naima Lassoued ◽  
Mohamed Chouikha
Keyword(s):  
Developing Countries ◽  
Explanatory Power ◽  
Simultaneous Equation ◽  
State Ownership ◽  
Governance System ◽  
Internal Governance ◽  
Content Type ◽  
Public Firms ◽  
Equation Analysis ◽  
Firm Profitability

Purpose The purpose of this paper is to examine the relationship between state ownership and firm profitability in developing countries by considering the endogenous nature of state ownership and firm profitability. Design/methodology/approach A simultaneous equation analysis is applied to study 232 Tunisian firms over the 2001-2013 period. This analysis is compared with OLS estimates to show its power in terms of an endogenous setting and its potential to improve estimation. Findings Unlike the OLS estimates that show a non-significant relationship between state ownership and firm profitability, the simultaneous equation analysis reveals a non-symmetrical concave relationship. Specifically, state ownership affects positively firm profitability when it is relatively small and negatively when state ownership dominates. Specification test indicates that both state ownership and firm profitability are endogenous. Furthermore, the simultaneous model’s explanatory power exceeds that of OLS estimates and proves to be a suitable estimation technique. Practical implications Taking into account public firms’ categorization, the authors implicitly examine the effect of privatization and corporatization on firm profitability. The findings imply that privatization is not the only solution to the operational problems of public firms, but an internal governance system restructuring can also be favorable for these firms. Originality/value In addition to focusing on a new database of developing countries, the case of Tunisian firms, the main empirical analysis is conducted by considering the endogeneity issue. Thus, the findings improve understanding of the role played by state ownership and suggest that a partial state control appears to be beneficial to firm profitability.

Privatization when the public firm is as efficient as private firms

2012 ◽  
Vol 29 (4) ◽  
pp. 1019-1023 ◽  
Author(s):  
Juan Carlos Bárcena-Ruiz
Keyword(s):  
Private Firms ◽  
The Public ◽  
Public Firm

scholarly journals CEO Turnover–Performance Sensitivity in Private Firms

2017 ◽  
Vol 52 (2) ◽  
pp. 583-611 ◽  
Author(s):  
Huasheng Gao ◽  
Jarrad Harford ◽  
Kai Li
Keyword(s):  
Chief Executive ◽  
Ceo Turnover ◽  
Private Firms ◽  
Board Structure ◽  
Turnover Rates ◽  
Public And Private ◽  
Public Firms ◽  
Performance Improvements ◽  
Performance Sensitivity ◽  
Quality Of Accounting Information

We compare chief executive officer (CEO) turnover in public and large private firms. Public firms have higher turnover rates and exhibit greater turnover–performance sensitivity (TPS) than private firms. When we control for pre-turnover performance, performance improvements are greater for private firms than for public firms. We investigate whether these differences are due to differences in quality of accounting information, the CEO candidate pool, CEO power, board structure, ownership structure, investor horizon, or certain unobservable differences between public and private firms. One factor contributing to public firms’ higher turnover rates and greater TPS appears to be investor myopia.

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