DP571 Stock Markets and Corporate Performance: A Comparison of Quoted and Unquoted Firms

Author(s): Ian Alexander, Colin Mayer
Publication Date: August 1991
Keyword(s): Corporate Finance and Investment, Short Termism, Stock Markets
JEL(s): G32
Programme Areas: Applied Macroeconomics
Link to this Page: cepr.org/active/publications/discussion_papers/dp.php?dpno=571

This paper examines the influence of stock markets on corporate performance. It compares large private and publicly listed companies in the UK. It finds that, controlling for size and industry, quoted firms invest more and grow more rapidly than unquoted firms. They earn higher profits and pay out a higher proportion of their earnings as dividends. They raise more equity finance but use this to purchase equity in other companies. In contrast, private companies are concentrated in low technology industries. There is therefore no evidence of adverse effects of stock markets on corporate performance. The proposition that firms are involuntarily driven to seek listings, however, cannot be rejected.