Is the American Public Corporation in Trouble?
Kathleen M. Kahle
University of Arizona - Department of Finance
René M. Stulz
Ohio State University (OSU) - Department of Finance; National Bureau of Economic Research (NBER); European Corporate Governance Institute (ECGI)
November 1, 2016
Charles A Dice Center Working No. 2016-23
Fisher College of Business Working Paper No. 2016-03-23
We examine the current state of the American public corporation and how it has evolved over the last forty years. There are fewer public corporations now than forty years ago, but they are much older and larger. They invest differently, as the importance of R&D investments has grown relative to capital expenditures. On average, public firms have record high cash holdings and in most recent years they have more cash than long-term debt. They are less profitable than they used to be and profits are more concentrated, as the top 100 firms now account for most of the net income of American public firms. Accounting statements are less informative about the performance and the value of firms because firms increasingly invest in intangible assets that do not appear on their balance sheets. Firms’ total payouts to shareholders as a percent of net income are at record levels, suggesting that firms either lack opportunities to invest or have poor incentives to invest. The credit crisis appears to leave few traces on the course of American public corporations.
Number of Pages in PDF File: 35
Keywords: Public Firm, Delist, IPO, Leverage, Equity Issuance, Repurchases, Cash Flow
JEL Classification: D22, G24, G30
Date posted: November 16, 2016 ; Last revised: November 23, 2016