Skip to Content
Rekenthaler Report

Do Public Companies Underinvest?

Three professors say yes.

Living for the Moment
An academic working paper finds that public companies live for the moment. That is, public companies invest less in their businesses than do private companies so that they can boast better current results.

In "Corporate Investment and Stock Market Listing: A Puzzle?," professors John Asker, Joan Farre-Mensa, and Alexander Ljungqvist held company size and industry constant and found that the private companies in their (new and extensive) database plowed an average of 6.8% of their assets back into their businesses each year, as opposed to 3.7% for the public companies. What's more, the professors assert, private companies are "four times more responsive to changes in investment opportunities than are those of public firms." The data covers the time period 2001-11. The professors calculate investment by summing a company's spending on capital expenditures, or capex, and mergers and acquisitions, or M&A. 

Transparency is how we protect the integrity of our work and keep empowering investors to achieve their goals and dreams. And we have unwavering standards for how we keep that integrity intact, from our research and data to our policies on content and your personal data.

We’d like to share more about how we work and what drives our day-to-day business.

We sell different types of products and services to both investment professionals and individual investors. These products and services are usually sold through license agreements or subscriptions. Our investment management business generates asset-based fees, which are calculated as a percentage of assets under management. We also sell both admissions and sponsorship packages for our investment conferences and advertising on our websites and newsletters.

How we use your information depends on the product and service that you use and your relationship with us. We may use it to:

  • Verify your identity, personalize the content you receive, or create and administer your account.
  • Provide specific products and services to you, such as portfolio management or data aggregation.
  • Develop and improve features of our offerings.
  • Gear advertisements and other marketing efforts towards your interests.

To learn more about how we handle and protect your data, visit our privacy center.

Maintaining independence and editorial freedom is essential to our mission of empowering investor success. We provide a platform for our authors to report on investments fairly, accurately, and from the investor’s point of view. We also respect individual opinions––they represent the unvarnished thinking of our people and exacting analysis of our research processes. Our authors can publish views that we may or may not agree with, but they show their work, distinguish facts from opinions, and make sure their analysis is clear and in no way misleading or deceptive.

To further protect the integrity of our editorial content, we keep a strict separation between our sales teams and authors to remove any pressure or influence on our analyses and research.

Read our editorial policy to learn more about our process.