Less Listing
Rabu, 21 Agustus 2019
Academic Articles,
Commentary,
Economists,
Finance,
Financial Reform,
Regulation
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Stocks are fleeing the exchanges inward the US. Small in addition to immature stocks are disappearing most, alongside older larger stocks dominating. Less world agency to a greater extent than private, non less companies. Companies are to a greater extent than in addition to to a greater extent than financed past times private equity, groups of large investors, debt, venture majuscule in addition to thus forth.
This is largely a U.S. phenomenon, which is of import for us to figure out what's going on:
What's going on? Doidge, Kahle, Karolyi, in addition to Stulz convey around intriguing hypotheses. U.S. concern is to a greater extent than in addition to to a greater extent than invested inward intellectual majuscule rather than physical majuscule -- software, organizational improvements, know-how, non boom furnaces. These, they speculate, are less good financed past times issuing shares on the opened upwardly market, in addition to amend past times private owners in addition to debt.
Improvements inward fiscal applied scientific discipline such every bit derivatives let companies to offload risks without the "agency costs" of equity, in addition to thus proceed a narrower grouping of equity investors in addition to to a greater extent than debt financing.
"We fighting that the importance of intangible investment has grown only that world markets are non well-suited for young, R&D-intensive companies. Since at that topographic point is abundant majuscule available to such firms without going public, they convey trivial incentive to create thus until they make the betoken inward their lifecycle where they focus to a greater extent than on payouts than on raising capital."
I.e. the exclusively argue to larn out world is for the founders to cash out, in addition to to offering a basically bond-like safety for investors. But non to heighten capital.
They leave of absence out the obvious inquiry -- to what extent is this driven past times regulation? Sarbanes Oxley, SEC, in addition to other regulations in addition to political interference brand beingness a world companionship inward the U.S. a to a greater extent than in addition to to a greater extent than costly, in addition to dangerous, proposition. This helps to response the question, why inward the US.
The motility of young, entrepreneurial companies who postulate financing to grow to private markets, express to pocket-sized numbers of qualified investors, has all sorts of downsides. If y'all worry near inequality, regulations that exclusively rich people may invest inward non-traded stocks should await scandalous, nevertheless cloaked inward consumer protection. But if y'all tin flame exclusively convey 500 investors, they volition convey to move wealthy. Moving financing from equity to debt in addition to derivatives does non await corking from a fiscal stability betoken of view.
Our fiscal scheme has larn out remarkably democratized inward recent years. Once upon a fourth dimension exclusively wealthy individuals held stocks, in addition to had access to the superior investment returns they provide. Now index funds, 4501(k) plans are opened upwardly to everyone, in addition to their pension funds. What volition they invest inward every bit listed equity disappears?
H5N1 wealth tax, tardily to assess on publicly traded stock in addition to much harder to assess on private companies alongside complex part structures -- peculiarly structures designed to avoid the taxation -- volition exclusively exacerbate the problem. More moves to regulate the boards in addition to activities of world companies volition exclusively exacerbate the problem.
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