Do Publicly Traded Firms Price Differently from Private Firms?

Abstract

This article analyzes whether publicly traded firms price differently from privately held firms in the product markets. Our empirical evidence shows that, in the U.S. newspaper industry, firms increase their prices when their ownership structure changes from private to public. The effects are robust and significant. A plausible explanation is that private owners enjoy more freedom than public managers to expand circulation and distort content, pursuing the consumption of nonpecuniary benefits of control. Additional evidence is consistent with this interpretation. Public newspapers show lower prices when insiders' ownership participation is higher. Moreover, private newspapers appear more likely than public newspapers to endorse a candidate during presidential campaigns. To my knowledge there are no previous studies comparing pricing by private and public companies. Copyright 2003, Oxford University Press.