The Deregulation of the Private Equity Markets and the Decline in IPOs

62 Pages Posted: 15 Aug 2017 Last revised: 8 Feb 2019

See all articles by Michael Ewens

Michael Ewens

California Institute of Technology - Division of the Humanities and Social Sciences; National Bureau of Economic Research (NBER)

Joan Farre-Mensa

University of Illinois at Chicago - Department of Finance

Date Written: December 26, 2018

Abstract

The deregulation of securities laws in the 1990s—and in particular the National Securities Markets Improvement Act of 1996—has facilitated the process of raising capital privately and been a key driver of the decline in U.S. IPOs. Privately-held startups are now able to grow to a size historically available only to their public peers. The IPO decline is not a market failure in the process of going public. Rather, it is the result of founders taking advantage of their increased bargaining power and lower cost of being private to realize their preference for control by choosing to remain private.

Keywords: Initial Public Offerings (IPOs), Venture Capital, Private Equity, Founder Equity, NSMIA

JEL Classification: G32, G24, G28

Suggested Citation

Ewens, Michael and Farre-Mensa, Joan, The Deregulation of the Private Equity Markets and the Decline in IPOs (December 26, 2018). Available at SSRN: https://ssrn.com/abstract=3017610 or http://dx.doi.org/10.2139/ssrn.3017610

Michael Ewens (Contact Author)

California Institute of Technology - Division of the Humanities and Social Sciences ( email )

1200 East California Blvd.
Pasadena, CA 91125
United States

National Bureau of Economic Research (NBER) ( email )

1050 Massachusetts Avenue
Cambridge, MA 02138
United States

Joan Farre-Mensa

University of Illinois at Chicago - Department of Finance ( email )

2431 University Hall (UH)
601 S. Morgan Street
Chicago, IL 60607-7124
United States

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