Private Firm Investment and Public Peer Misvaluation

• 成果类型: Article
• 署名作者: Badertscher, Brad A.; Shanthikumar, Devin M.; Teoh, Siew Hong
• 署名单位: University of Notre Dame; University of California System; University of California Irvine
• 刊物名称: ACCOUNTING REVIEW
• ISSN/ISSBN: 0001-4826
• DOI: 10.2308/accr-52369
• 发表日期: 2019
• 页码: 31-60
• 关键词: financial-reporting quality; stock-market; earnings management; Information environment; corporate-investment; ceo overconfidence; Trade size; Sentiment; decisions; prices

摘要

We study how public firm misvaluation affects private peer firm investments. An economic competition hypothesis predicts a negative relation because misvaluation-induced new investment by public firms crowds out investment by private peers that share common input or output markets. An alternative shared sentiment hypothesis predicts a positive relation because private firm stakeholders share in the sentiment associated with misvaluation in public markets. Misvaluation is proxied using both the price-to-fundamental ratio and an exogenous instrument obtained from mutual fund flows. The evidence is consistent with the shared sentiment hypothesis, and robust to alternative treatments for growth opportunities. Private firms finance misvaluation-induced investment primarily internally or externally with debt, not equity. Finally, misvaluation-induced investment increases future return on investment for private firms, in contrast with public firms. Overall, these findings suggest that overvaluation in public markets increases private firm investments and has beneficial effects on private firm investments by relaxing financing constraints.