37 research outputs found
The Deregulation of the Private Equity Markets and the Decline in IPOs
The deregulation of securities lawsâin particular the National Securities Markets Improvement Act (NSMIA) of 1996âhas increased the supply of private capital to late-stage private startups, which are now able to grow to a size that few private firms used to reach. NSMIA is one of a number of factors that have changed the going-public versus staying-private trade-off, helping bring about a new equilibrium where fewer startups go public, and those that do are older. This new equilibrium does not reflect an initial public offering (IPO) market failure. Rather, founders are using their increased bargaining power vis-Ă -vis investors to stay private longer
The Deregulation of the Private Equity Markets and the Decline in IPOs
The deregulation of securities lawsâin particular the National Securities Markets Improvement Act (NSMIA) of 1996âhas increased the supply of private capital to late-stage private startups, which are now able to grow to a size that few private firms used to reach. NSMIA is one of a number of factors that have changed the going-public versus staying-private trade-off, helping bring about a new equilibrium where fewer startups go public, and those that do are older. This new equilibrium does not reflect an initial public offering (IPO) market failure. Rather, founders are using their increased bargaining power vis-Ă -vis investors to stay private longer
Comparing the Investment Behavior of Public and Private Firms
We evaluate differences in investment behavior between stock market
listed and privately held firms in the U.S. using a rich new data source
on private firms. Listed firms invest less and are less responsive to
changes in investment opportunities compared to observably similar,
matched private firms, especially in industries in which stock prices
are particularly sensitive to current earnings. These differences do not
appear to be due to unobserved differences between public and private
firms, how we measure investment opportunities, life cycle differences,
or our matching criteria. We suggest that the patterns we document are
most consistent with theoretical models emphasizing the role of
managerial myopia
What Do Private Firms Look like?
Private firms in the U.S. are not subject to public reporting
requirements, so relatively little is known about their characteristics
and behavior – until now. This Data Appendix describes a new
database on private U.S. firms, created by Sageworks Inc. in cooperation
with hundreds of accounting firms. The contents of the Sageworks
database mirror Compustat, the standard database for public U.S. firms.
It contains balance sheet and income statement data for 95,297 private
firms covering 250,507 firms-years over the period 2002 to 2007. We
compare this database to the joint Compustat-CRSP database of public
firms and to the Federal Reserve’s 2003 National Survey of Small
Business Finances
Comparing the Investment Behavior of Public and Private Firms
We evaluate differences in investment behavior between stock market listed and privately held firms in the U.S. using a rich new data source on private firms. Listed firms invest less and are less responsive to changes in investment opportunities compared to observably similar, matched private firms, especially in industries in which stock prices are particularly sensitive to current earnings. These differences do not appear to be due to unobserved differences between public and private firms, how we measure investment opportunities, lifecycle differences, or our matching criteria. We suggest that the patterns we document are most consistent with theoretical models emphasizing the role of managerial myopia.
Financing Payouts
We study the extent to which firms rely on the capital markets to fund their payouts. We find that 42% of firms that pay out capital also initiate debt or equity issues in the same year, resulting in 32% of aggregate payouts being externally financed. Most firms that
simultaneously raise and distribute capital do not generate enough free cash flow to fund their payouts internally. Firms devote more external capital to finance share repurchases than to
avoid dividend cuts. Payouts financed by debt, which allow firms to jointly manage their capital structure and liquidity, are by far the most common
Gender Differences in Russian Colour Naming
In the present study we explored Russian colour naming in a web-based psycholinguistic experiment
(http://www.colournaming.com). Colour singletons representing the Munsell Color Solid (N=600 in total) were presented on a computer monitor and named using an unconstrained colour-naming method. Respondents were
Russian speakers (N=713). For gender-split equal-size samples (NF=333, NM=333) we estimated and compared (i)
location of centroids of 12 Russian basic colour terms (BCTs); (ii) the number of words in colour descriptors; (iii) occurrences of BCTs most frequent non-BCTs. We found a close correspondence between femalesâ and malesâ
BCT centroids. Among individual BCTs, the highest inter-gender agreement was for seryj âgreyâ and goluboj
âlight blueâ, while the lowest was for sinij âdark blueâ and krasnyj âredâ. Females revealed a significantly richer repertory of distinct colour descriptors, with great variety of monolexemic non-BCTs and âfancyâ colour names; in comparison, males offered relatively more BCTs or their compounds. Along with these measures, we gauged
denotata of most frequent CTs, reflected by linguistic segmentation of colour space, by employing a synthetic
observer trained by gender-specific responses. This psycholinguistic representation revealed femalesâ more
refined linguistic segmentation, compared to males, with higher linguistic density predominantly along the redgreen axis of colour space
Payout Policy
We survey the literature on payout policy, with a particular emphasis on developments in the past two decades. The cross-sectional empirical evidence for the traditional motivations behind firms paying out (agency, signaling, and taxes) is most persuasive with regard to agency considerations. Studies centered on the May 2003 dividend tax cut confirm that differences in the taxation of dividends and capital gains have only a second-order impact on setting payout policy. None of the three traditional explanations can account for secular changes in how payouts have been made over the past 30 years, during which repurchases have replaced dividends as the prime vehicle for corporate payouts. Other payout motivations, such as changes in compensation practices and management incentives, are better able to explain the observed variation in payout patterns over time than the traditional motivations. The most recent evidence suggests that further
insights can be gained from viewing payout decisions as an integral
part of a firmâs larger financial ecosystem, with important implications for financing, investment, and risk management
Does the Stock Market Harm Investment Incentives?
We examine whether stock market-listed firms in the U.S. invest suboptimally due to agency costs resulting from separation of ownership and control. We derive testable predictions to distinguish between underinvestment due to rational âshort-termismâ and overinvestment due to âempire building.â Empirical identification relies on a proxy for optimal investment derived from a rich new data source on unlisted U.S. firms. Listed firms invest less and are less responsive to changes in investment opportunities compared to matched unlisted firms, especially in industries in which stock prices are particularly sensitive to current profits. Listed firms also tend to smooth their earnings growth and dividends and are reluctant to report negative earnings. These findings are consistent with short-termism and contrary to what one would expect if empire-building were the dominant agency problem in the stock market. Our results suggest that the stock market harms investment incentives, at least for the fast-growing companies in our sample.Agency problems; Corporate investment; Empire building; IPOs; Managerial incentives; Managerial myopia; Private companies; Short-termism