Does Stock Market Listing Boost or Impede Corporate Investment?

Does Stock Market Listing Boost or Impede Corporate Investment?

21/12

İbrahim Yarba, Ahmet Duhan Yassa

English

July 2021

This paper investigates investment behavior across public and privately held firms using a novel firm-level dataset. We use coarsened exact matching to construct a control group of firms with which we compare listed firms before and after listing in a difference-in-differences framework. Results reveal that stock market listing spurs growth significantly in terms of sales, employment and assets for manufacturing firms. Furthermore, results indicate that manufacturing listed firms invest more than their non-listed counterparts. In addition, their investment decisions are significantly more sensitive to changes in investment opportunities, and they respond more aggressively. These results constitute a rejecting evidence against existence of short-termism for manufacturing listed firms in Turkey. Moreover, these findings provide significant support for the arguments regarding the advantages of public firms in terms of better access to external finance and enhanced corporate structure, which enables them to fulfill growth potential much easily, and highlight the importance of policies that should be implemented to deepen the Turkish capital markets.

Stock market listing, Corporate investment, Firm growth, Short-termism, Coarsened exact matching, Difference-in-differences

C23; D22; G31; G32; L25