Investors are not a homogeneous group. They comprise a broad spectrum of shareholders who differ, among other things, in terms of their investment horizon. While investors with a short investment horizon want to maximize current stock prices, as they expect to exit their positions soon, long-term investors seek to maximize the present value of future cash flows (e.g., Gaspar et al., 2004;Stein, 1996). In recent decades, researchers have begun focusing on distinguishing between shareholders in this manner, particularly in the context of CEO remuneration (

Using a sample of comparably sized public listed and private firms from nine European countries, we show that public firms reduce their investments by about 50% more than private firms in response to an increase in policy-related uncertainty. We find suggestive evidence that this can be explained by public firms’ management being typically subject to greater shareholder scrutiny than private firms’ management. Furthermore, only public firms invest more efficiently when confronted with uncertainty. Thus, private firms may benefit from emulating the decision-making processes of public firms in uncertain times.

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