We exploit Medicare national coverage reimbursement approvals as a quasi-natural experiment to investigate how the financing decisions of private and publicly traded firms respond to changes in investment opportunities. We find that publicly traded companies increase their external financing and their subsequent product introductions by more than private companies in response to national coverage approvals. Private equity financing is the primary source of the increased financing for public firms. We show that the stock characteristics of publicly traded firms, such as liquidity and price informativeness, and product market competition are important factors in explaining their financing advantage.
|Number of pages||46|
|Journal||Review of Financial Studies|
|State||Published - 1 May 2017|
Bibliographical noteFunding Information:
Phillips acknowledges financial support of the National Science Foundation (NSF) through grant #0965328. Sertsios acknowledges the financial support of Fondecyt Proyecto Regular # 1160037.
© 2016 The Author. Published by Oxford University Press on behalf of The Society for Financial Studies. All rights reserved.