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

46 Pages Posted: 12 Jun 2016 Last revised: 5 Jun 2019

See all articles by Albert Sheen

Albert Sheen

University of Oregon - Department of Finance

Date Written: March 25, 2019

Abstract

I compare the U.S. capacity expansion decisions of public and private producers of seven commodity chemicals from 1989-2006. 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.

JEL Classification: G31, G32

Suggested Citation

Sheen, Albert, Do Public and Private Firms Behave Differently? An Examination of Investment in the Chemical Industry (March 25, 2019). Available at SSRN: https://ssrn.com/abstract=2792410 or http://dx.doi.org/10.2139/ssrn.2792410

Albert Sheen (Contact Author)

University of Oregon - Department of Finance ( email )

Lundquist College of Business
1208 University of Oregon
Eugene, OR 97403
United States

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