Forthcoming: Review of Financial Studies Financing and New Product Decisions of Private and Publicly Traded Firms

Phillips acknowledges financial support of the NSF through grant #0965328. Sertsios acknowledges the financial support of Fondecyt Proyecto Regular # 1160037. We thank Itay Goldstein (Editor) and two anonymous referees for very helpful comments. We are also indebted to Nicholas Crain, Erik Gilje, Kathleen Kahle, Yelena Larkin, P.T. Léger, Chen Lin, Evgeny Lyandres, Maria Teresa Marchica, Paul Povel, Michael Roberts, Jérôme Taillard, José Tessada, Patricio Valenzuela and seminar participants at Boston University, Erasmus University, John Hopkins University, Universidad Adolfo Ibanez, University of Amsterdam, University of Arizona, University of Southern California, Universidad Católica, the 2014 CICF conference, the 2014 FMA Asian Conference, the 2015 AFA meetings, the 4th mini-TOI conference, the 2nd (2015) Edinburgh Corporate Finance Conference, the 26th (2015) CFEA conference and the 2nd Empirical Workshop in Management Science and Economics for helpful comments. We thank Juan Cristobal Maass, MD-PhD, for helping us with medical institutional knowledge; and Felipe Cabezón for excellent research assistance. We alone are responsible for any errors and omissions. Supplementary results can be found on The Review of Financial Studies web site. Send correspondence to Gordon Phillips, Tuck School of Business at Dartmouth, 100 Tuck Hall, Hanover, NH 03755; telephone: (603) 646-9139; e-mail: [email protected]. We exploit Medicare national coverage reimbursement approvals as a quasi-natural