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Over the past two decades, the U.S. stock market has halved in size as the "public firm model" has begun to fall out of favor. We develop a political economy model of delistings from the stock market 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. A shrinking stock market can trigger a chain of events that leads to long-term reductions in aggregate investment, productivity, and employment.
We draw on new data and theory to examine how private market contracts adapt to serve multiple goals, particularly the social-benefit goals that impact...
The digital transformation is disrupting the financial sector. Venture capital, private equity and hedge funds are also affected. We see more and more...