The U.S. Listing Gap

The number of public companies in the US has declined significantly since the late 1990s. This is the subject of a working paper, The US Listing Gap by Craig Doidge (Toronto), George Karolyi (Cornell) and René Stulz (Ohio State). While recognizing that Sarbanes-Oxley has increased the costs of being a public company in the US, they still find the extent of the decline in the US numbers to be “puzzling.”

Marc Hodak, a reader and contributor to the JACF, agrees that the numbers of public companies have declined sharply but thinks the cause is fairly evident. On his blog, he says,

Well, it’s not puzzling if you use a more realistic model of what would be driving those results. The model I have used for over a decade is quite simple:

A company will choose to be public when the benefits of being a public company exceed its costs, otherwise it will not join, or will exit, the public sphere.

The way it exits is of secondary importance.

His entire post is worth reading.

Marc addressed some of the costs of being a public company on the US in The Growing Executive Compensation Advantage Of Private Versus Public Companies in the Winter 2014 issue of the JACF, (Volume 26 Number 1).

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