Publicly Traded Firms, Private Firms and the Economy

Question A:

The lower willingness of private firms to go public, combined with the increased number of publicly traded firms being taken private over the last 25 years, is measurably net negative for economic growth.

Responses weighted by each expert's confidence

Question B:

All else equal, reducing regulatory barriers (including reporting requirements such as Sarbanes Oxley 404) to public listing would substantially increase the share of publicly traded firms in the economy.

Responses weighted by each expert's confidence

Question C:

The lack of transparency about unlisted private firms' financial performance substantially hinders the efficiency of the allocation of capital.

Responses weighted by each expert's confidence

Question A Participant Responses

Participant University Vote Confidence Bio/Vote History
Campbell
John Campbell
Harvard
Uncertain
3
Bio/Vote History
Cochrane
John Cochrane
Hoover Institution Stanford
Uncertain
5
Bio/Vote History
It is likely a small net negative for the level of economic activity. Growth is harder. Though, keep track of the counterfactual. Companies are staying private for a reason. Economy only improves if we fix the reason. Forcing more public companies otherwise will hurt.
Cornelli
Francesca Cornelli
Northwestern Kellogg Did Not Answer Bio/Vote History
Diamond
Douglas Diamond
Chicago Booth
Disagree
4
Bio/Vote History
Du
Wenxin Du
HBS
Uncertain
6
Bio/Vote History
Duffie
Darrell Duffie
Stanford
Uncertain
6
Bio/Vote History
Eberly
Janice Eberly
Northwestern Kellogg Did Not Answer Bio/Vote History
Fama
Eugene Fama
Chicago Booth
Strongly Agree
9
Bio/Vote History
Gabaix
Xavier Gabaix
Harvard
Disagree
6
Bio/Vote History
Goldstein
Itay Goldstein
UPenn Wharton
Agree
9
Bio/Vote History
Graham
John Graham
Duke Fuqua
Disagree
9
Bio/Vote History
Harvey
Campbell R. Harvey
Duke Fuqua
Disagree
6
Bio/Vote History
The rise of privates is due to the increased regulatory burden for public firms. You could argue this is positive for growth given private firms have less regulatory scrutiny and may be willing to take extra risk.
Hong
Harrison Hong
Columbia
Uncertain
5
Bio/Vote History
Jiang
Wei Jiang
Emory Goizueta
Disagree
6
Bio/Vote History
Kaplan
Steven Kaplan
Chicago Booth
Strongly Disagree
8
Bio/Vote History
Kashyap
Anil Kashyap
Chicago Booth
Uncertain
5
Bio/Vote History
see the explanation following the next two questions
Koijen
Ralph Koijen
Chicago Booth Did Not Answer Bio/Vote History
Kuhnen
Camelia Kuhnen
UNC Kenan-Flagler
Disagree
6
Bio/Vote History
Lo
Andrew Lo
MIT Sloan Did Not Answer Bio/Vote History
Lowry
Michelle Lowry
Drexel LeBow
Disagree
7
Bio/Vote History
Ludvigson
Sydney Ludvigson
NYU
Uncertain
7
Bio/Vote History
Maggiori
Matteo Maggiori
Stanford GSB Did Not Answer Bio/Vote History
Matvos
Gregor Matvos
Northwestern Kellogg Did Not Answer Bio/Vote History
Moskowitz
Tobias Moskowitz
Yale School of Management
Uncertain
1
Bio/Vote History
It could go either way. Private firms face fewer constraints, which could lead to more growth, but also face less liquid and diverse capital markets, which could hurt growth. Unclear which factors matter more.
Nagel
Stefan Nagel
Chicago Booth
Disagree
4
Bio/Vote History
Parker
Jonathan Parker
MIT Sloan
Agree
3
Bio/Vote History
Great question for quantitative research! In theory, public ownership is more efficient since it allows the same incentive structures for management and greater diversification by owners. So the move to private ownership is a bad sign a priori for economic growth.
Parlour
Christine Parlour
Berkeley Haas
Uncertain
6
Bio/Vote History
Unclear how large financial constraints are
Philippon
Thomas Philippon
NYU Stern
Agree
8
Bio/Vote History
going public has positive externalities for scale and price discovery
Puri
Manju Puri
Duke Fuqua
Uncertain
6
Bio/Vote History
Roberts
Michael R. Roberts
UPenn Wharton
Uncertain
7
Bio/Vote History
Sapienza
Paola Sapienza
Northwestern Kellogg
Uncertain
5
Bio/Vote History
Economic growth is not necessarily linked to the size of the public market, as long as robust alternative sources of capital are available
Seru
Amit Seru
Stanford GSB
Uncertain
7
Bio/Vote History
Stambaugh
Robert Stambaugh
UPenn Wharton
Uncertain
6
Bio/Vote History
Starks
Laura Starks
UT Austin McCombs Did Not Answer Bio/Vote History
Stein
Jeremy Stein
Harvard
Uncertain
4
Bio/Vote History
Stroebel
Johannes Stroebel
NYU Stern Did Not Answer Bio/Vote History
Titman
Sheridan Titman
UT Austin McCombs
Agree
8
Bio/Vote History
I think there is an effect, but I don’t think it’s particularly large..
Van Nieuwerburgh
Stijn Van Nieuwerburgh
Columbia Business School
Uncertain
6
Bio/Vote History
Whited
Toni Whited
UMich Ross School
Agree
4
Bio/Vote History

Question B Participant Responses

Participant University Vote Confidence Bio/Vote History
Campbell
John Campbell
Harvard
Agree
6
Bio/Vote History
Cochrane
John Cochrane
Hoover Institution Stanford
Agree
8
Bio/Vote History
It's pretty clear that useless regulatory requirements are part of the reason driving companies out of public listing. Regulation needs to be "better" not "less."
Cornelli
Francesca Cornelli
Northwestern Kellogg Did Not Answer Bio/Vote History
Diamond
Douglas Diamond
Chicago Booth
Agree
4
Bio/Vote History
Du
Wenxin Du
HBS
Agree
5
Bio/Vote History
Duffie
Darrell Duffie
Stanford
Agree
5
Bio/Vote History
In just about any activity where there is entry at the margin, lowering the cost of entry increases the quantity of entry.
Eberly
Janice Eberly
Northwestern Kellogg Did Not Answer Bio/Vote History
Fama
Eugene Fama
Chicago Booth
Agree
9
Bio/Vote History
Gabaix
Xavier Gabaix
Harvard
Agree
7
Bio/Vote History
Goldstein
Itay Goldstein
UPenn Wharton
Agree
8
Bio/Vote History
Graham
John Graham
Duke Fuqua
Disagree
9
Bio/Vote History
Harvey
Campbell R. Harvey
Duke Fuqua
Agree
6
Bio/Vote History
If you reduce the cost of being public, it is likely more firms will choose the public route.
Hong
Harrison Hong
Columbia
Agree
5
Bio/Vote History
Jiang
Wei Jiang
Emory Goizueta
Agree
7
Bio/Vote History
Kaplan
Steven Kaplan
Chicago Booth
Strongly Agree
9
Bio/Vote History
Kashyap
Anil Kashyap
Chicago Booth
Agree
7
Bio/Vote History
There are plenty of reporting burdens that public firms face, not clear that they are all constructive
Koijen
Ralph Koijen
Chicago Booth Did Not Answer Bio/Vote History
Kuhnen
Camelia Kuhnen
UNC Kenan-Flagler
Agree
6
Bio/Vote History
Lo
Andrew Lo
MIT Sloan Did Not Answer Bio/Vote History
Lowry
Michelle Lowry
Drexel LeBow
Disagree
7
Bio/Vote History
Using econometric techniques to precisely identify the influence of regulatory costs, Ewens, Xiao and Xu (JFE 2024) conclude that regulatory costs "only explain a small part of the decline in the number of public firms."
-see background information here
Ludvigson
Sydney Ludvigson
NYU
Agree
6
Bio/Vote History
Maggiori
Matteo Maggiori
Stanford GSB Did Not Answer Bio/Vote History
Matvos
Gregor Matvos
Northwestern Kellogg Did Not Answer Bio/Vote History
Moskowitz
Tobias Moskowitz
Yale School of Management
Agree
6
Bio/Vote History
Directionally this is likely true, but the effect may be small.
Nagel
Stefan Nagel
Chicago Booth
Agree
5
Bio/Vote History
Parker
Jonathan Parker
MIT Sloan
Agree
7
Bio/Vote History
Disclosure is critically important for public markets, but it we have overshot optimal legal requirements. The law should also be narrower — not every piece of undisclosed news that moves markets is securities fraud — and not a profit opportunity for (privately-owned) law firms.
Parlour
Christine Parlour
Berkeley Haas
Agree
7
Bio/Vote History
Philippon
Thomas Philippon
NYU Stern
Uncertain
5
Bio/Vote History
Puri
Manju Puri
Duke Fuqua
Agree
7
Bio/Vote History
Roberts
Michael R. Roberts
UPenn Wharton
Strongly Agree
8
Bio/Vote History
Sapienza
Paola Sapienza
Northwestern Kellogg
Agree
4
Bio/Vote History
Cost of compliances influences choices of going or staying public. Alternative sources of capital are also considerations in this decision. It is difficult to make a general statement.
Seru
Amit Seru
Stanford GSB
Agree
7
Bio/Vote History
Stambaugh
Robert Stambaugh
UPenn Wharton
Agree
8
Bio/Vote History
Starks
Laura Starks
UT Austin McCombs Did Not Answer Bio/Vote History
Stein
Jeremy Stein
Harvard
Agree
4
Bio/Vote History
Stroebel
Johannes Stroebel
NYU Stern Did Not Answer Bio/Vote History
Titman
Sheridan Titman
UT Austin McCombs
Agree
8
Bio/Vote History
Despite this effect, reporting standards are beneficial.
Van Nieuwerburgh
Stijn Van Nieuwerburgh
Columbia Business School
Agree
5
Bio/Vote History
Whited
Toni Whited
UMich Ross School
Agree
4
Bio/Vote History

Question C Participant Responses

Participant University Vote Confidence Bio/Vote History
Campbell
John Campbell
Harvard
Uncertain
3
Bio/Vote History
Cochrane
John Cochrane
Hoover Institution Stanford
Disagree
8
Bio/Vote History
Wealthy private investors, channeled through venture and private equity funds, are able to demand the information they need before investing billions. And also able to not demand useless information.
Cornelli
Francesca Cornelli
Northwestern Kellogg Did Not Answer Bio/Vote History
Diamond
Douglas Diamond
Chicago Booth
Uncertain
4
Bio/Vote History
Du
Wenxin Du
HBS
Agree
6
Bio/Vote History
Duffie
Darrell Duffie
Stanford
Uncertain
3
Bio/Vote History
Holding constant the wide distribution of investors typical of public firms, this is obvious. But private firms have far more concentrated ownership, with a substantial degree of direct shareholder oversight.
Eberly
Janice Eberly
Northwestern Kellogg Did Not Answer Bio/Vote History
Fama
Eugene Fama
Chicago Booth
Agree
9
Bio/Vote History
Gabaix
Xavier Gabaix
Harvard
Uncertain
6
Bio/Vote History
Goldstein
Itay Goldstein
UPenn Wharton
Agree
8
Bio/Vote History
Graham
John Graham
Duke Fuqua
Agree
7
Bio/Vote History
Harvey
Campbell R. Harvey
Duke Fuqua
Uncertain
5
Bio/Vote History
The private investors are likely "qualified" investors and should be able to ask the right questions.
Hong
Harrison Hong
Columbia
Agree
5
Bio/Vote History
Jiang
Wei Jiang
Emory Goizueta
Uncertain
6
Bio/Vote History
Kaplan
Steven Kaplan
Chicago Booth
Disagree
8
Bio/Vote History
Kashyap
Anil Kashyap
Chicago Booth
Uncertain
5
Bio/Vote History
The lack of transparency definitely hinders the allocation and judging the quantitative impact is hard. This is the downside of the rise in the share of private firms.
Koijen
Ralph Koijen
Chicago Booth Did Not Answer Bio/Vote History
Kuhnen
Camelia Kuhnen
UNC Kenan-Flagler
Strongly Agree
6
Bio/Vote History
Lo
Andrew Lo
MIT Sloan Did Not Answer Bio/Vote History
Lowry
Michelle Lowry
Drexel LeBow
Agree
5
Bio/Vote History
Ludvigson
Sydney Ludvigson
NYU
Agree
5
Bio/Vote History
Maggiori
Matteo Maggiori
Stanford GSB Did Not Answer Bio/Vote History
Matvos
Gregor Matvos
Northwestern Kellogg Did Not Answer Bio/Vote History
Moskowitz
Tobias Moskowitz
Yale School of Management
Strongly Agree
8
Bio/Vote History
To the extent performance conveys information, lack of transparency in performance should reduce capital allocation efficiency.
Nagel
Stefan Nagel
Chicago Booth
Disagree
5
Bio/Vote History
Parker
Jonathan Parker
MIT Sloan
Agree
3
Bio/Vote History
Yes, lack of transparency increases the scope for fraud, and concentrated ownership that can become informed also implies concentrated risks and so reduced investment.
Parlour
Christine Parlour
Berkeley Haas
Disagree
7
Bio/Vote History
Unclear if firms are opaque to relevant investors
Philippon
Thomas Philippon
NYU Stern
Agree
7
Bio/Vote History
Puri
Manju Puri
Duke Fuqua
Uncertain
5
Bio/Vote History
Roberts
Michael R. Roberts
UPenn Wharton
Agree
7
Bio/Vote History
I'm more concerned with the increased cost of capital to private firms, all else equal.
Sapienza
Paola Sapienza
Northwestern Kellogg
Uncertain
4
Bio/Vote History
The private equity industry has a very steep incentive structure. Efficiency is affected by many factors. I am skeptical that more transparency toward retail investors would change things.
Seru
Amit Seru
Stanford GSB
Agree
7
Bio/Vote History
Stambaugh
Robert Stambaugh
UPenn Wharton
Uncertain
7
Bio/Vote History
Starks
Laura Starks
UT Austin McCombs Did Not Answer Bio/Vote History
Stein
Jeremy Stein
Harvard
Disagree
4
Bio/Vote History
Stroebel
Johannes Stroebel
NYU Stern Did Not Answer Bio/Vote History
Titman
Sheridan Titman
UT Austin McCombs
Agree
8
Bio/Vote History
Of course this depends on what we mean by substantial. I think the effect is material, but not super large.
Van Nieuwerburgh
Stijn Van Nieuwerburgh
Columbia Business School
Agree
5
Bio/Vote History
Whited
Toni Whited
UMich Ross School
Agree
4
Bio/Vote History