Private Equity's Unintended Dark Side: On the Economic Consequences of Excessive Delistings

46 Pages Posted: 25 Jan 2016 Last revised: 6 Feb 2016

See all articles by Alexander Ljungqvist

Alexander Ljungqvist

New York University (NYU) - Department of Finance; National Bureau of Economic Research (NBER); Centre for Economic Policy Research (CEPR); European Corporate Governance Institute (ECGI); Research Institute of Industrial Economics (IFN)

Lars Persson

Research Institute of Industrial Economics (IFN); Centre for Economic Policy Research (CEPR)

Joacim Tåg

Research Institute of Industrial Economics (IFN)

Multiple version iconThere are 3 versions of this paper

Date Written: January 2016

Abstract

Over the past two decades, the U.S. stock market has been shrinking as the public firm model has begun to fall out of favor. We develop a political economy model of delistings to study the wider economic consequences of this trend. We show that the private and social incentives to delist firms from the stock market need not be aligned. Delistings can inadvertently impose an externality on the economy by reducing citizen-investors’ exposure to corporate profits and thereby undermining popular support for business-friendly policies. By facilitating companies’ departures from the stock market, private equity firms can trigger a chain of events that may lead to long-term reductions in aggregate investment, productivity, and employment.

Suggested Citation

Ljungqvist, Alexander and Persson, Lars and Tåg, Joacim, Private Equity's Unintended Dark Side: On the Economic Consequences of Excessive Delistings (January 2016). NBER Working Paper No. w21909. Available at SSRN: https://ssrn.com/abstract=2721770

Alexander Ljungqvist (Contact Author)

New York University (NYU) - Department of Finance ( email )

Stern School of Business
44 West 4th Street, Suite 9-160
New York, NY 10012-1126
United States
212-998-0304 (Phone)
212-995-4220 (Fax)

HOME PAGE: http://pages.stern.nyu.edu/~aljungqv

National Bureau of Economic Research (NBER) ( email )

1050 Massachusetts Avenue
Cambridge, MA 02138
United States

Centre for Economic Policy Research (CEPR)

London
United Kingdom

European Corporate Governance Institute (ECGI)

c/o ECARES ULB CP 114
B-1050 Brussels
Belgium

Research Institute of Industrial Economics (IFN) ( email )

Box 55665
Grevgatan 34, 2nd floor
Stockholm, SE-102 15
Sweden

Lars Persson

Research Institute of Industrial Economics (IFN) ( email )

Box 55665
Grevgatan 34, 2nd floor
Stockholm, SE-102 15
Sweden

Centre for Economic Policy Research (CEPR)

London
United Kingdom

Joacim Tåg

Research Institute of Industrial Economics (IFN) ( email )

Box 55665
Grevgatan 34, 2nd floor
Stockholm, SE-102 15
Sweden

Register to save articles to
your library

Register

Paper statistics

Downloads
18
Abstract Views
353
PlumX Metrics