The Oscillating Domains of Public and Private Markets

52 Pages Posted: 27 Feb 2023 Last revised: 14 Nov 2023

See all articles by Alperen Gözlügöl

Alperen Gözlügöl

London School of Economics - Law School

Julian Greth

Leibniz Institute for Financial Research SAFE

Tobias H. Troeger

Leibniz Institute for Financial Research SAFE; Goethe University Frankfurt - Faculty of Law; European Corporate Governance Institute (ECGI)

Date Written: February 1, 2023

Abstract

We contribute to the debate about the future of capital markets and corporate finance, which has ensued against the background of a significant boom in private markets and a corresponding decline in the number of firms and the amount of capital raised in public markets in the US and Europe.

Our research sheds light on the fluctuating significance of public and private markets for corporate finance over time. It challenges the conventional view of a linear progression from one market to the other. After taking a long-term perspective and examining historical developments more closely, we argue that a more complex interaction pattern between public and private markets emerges.

We claim that there is a dynamic divide between these markets. We identify specific factors that determine the degree to which investors, capital, and companies gravitate more toward one market than the other. However, in response to the status quo, other factors will gain momentum and favor the respective other market, leading to a new (unstable) equilibrium. Hence, we observe the oscillating domains of public and private markets over time. While these oscillations imply 'competition' between these markets, we unravel their complementarities, which also militate against a secular trend towards one market. Finally, we examine the role of regulation in this dynamic divide and some policy implications arising from our findings.

Keywords: corporate finance, capital markets, public markets, private markets, private equity, securities regulation, financial regulation

JEL Classification: D53, G1, G3, K22

Suggested Citation

Gözlügöl, Alperen Afşin and Greth, Julian and Tröger, Tobias Hans, The Oscillating Domains of Public and Private Markets (February 1, 2023). European Corporate Governance Institute - Law Working Paper No. 689/2023, LawFin Working Paper No. 52, SAFE Working Paper No. 384, Available at SSRN: https://ssrn.com/abstract=4372011 or http://dx.doi.org/10.2139/ssrn.4372011

Alperen Afşin Gözlügöl

London School of Economics - Law School ( email )

Houghton Street
London WC2A 2AE, WC2A 2AE
United Kingdom

Julian Greth

Leibniz Institute for Financial Research SAFE ( email )

House of Finance
Theodor-W.-Adorno-Platz 3
Frankfurt, 60323
Germany

Tobias Hans Tröger (Contact Author)

Leibniz Institute for Financial Research SAFE ( email )

(http://www.safe-frankfurt.de)
Theodor-W.-Adorno-Platz 3
Frankfurt am Main, 60323
Germany
+49 69 798 34391 (Phone)
+49 69 798 34536 (Fax)

HOME PAGE: http://bit.ly/3dQ93nd

Goethe University Frankfurt - Faculty of Law ( email )

Theodor-W.-Adorno-Platz 3 (Westend Campus)
Frankfurt, 60323
Germany
+49 69 798 34391 (Phone)
+49 69 798 34536 (Fax)

HOME PAGE: http://www.jura.uni-frankfurt.de/43940696/English-Version

European Corporate Governance Institute (ECGI) ( email )

c/o the Royal Academies of Belgium
Rue Ducale 1 Hertogsstraat
1000 Brussels
Belgium

HOME PAGE: http://www.ecgi.global/users/tobias-tr%C3%B6ger

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