Listing Gaps, Merger Waves, and the Privatization of American Equity Finance
59 Pages Posted: 21 Feb 2019 Last revised: 3 Sep 2019
Date Written: July 18, 2019
A cross-country predictive model shows that the U.S. economy has experienced over the last 25 years sharply declining numbers of listed firms, abnormally large volumes of merger activity and private equity investments, and abnormally high levels of stock market capitalization. We combine these trends and document a transition in the U.S. equity financing, from public to private capital raising. We find that the U.S. listing gap exclusively opens from 1997 to 2003 and is mostly explained by the rise of M&A activity and private equity investments since the mid-1990s. Finally, we document that this phenomenon is emerging in other developed economies, with a few years of delay.
Keywords: International financial markets; Stock listings; Equity financing; Mergers and acquisitions; Private equity; Government policy and regulation; Business and securities law.
JEL Classification: G15; G24; G34; G28; K22
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