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Eclipse of the Public Corporation or Eclipse of the Public Markets?


  • Craig Doidge
  • Kathleen M. Kahle
  • G. Andrew Karolyi
  • René M. Stulz


The authors look back at Michael Jensen's 1989 article “The Eclipse of the Public Corporation.†They find some of his predictions have been borne out but other important ones, not. Jensen concluded that the publicly held corporation was in decline and had outlived its usefulness in many sectors. He argued that agency costs made public corporations an inefficient form of organization and that new private organizational forms promoted by private equity firms would likely replace the public firm. The number of public firms in the U.S. has declined significantly but there are still many hugely profitable and successful public companies. U.S. public markets are still well†suited for firms with mostly tangible assets. So, what we are really witnessing is an eclipse not of public corporations, but of the public markets as the place where young firms with mostly intangible capital seek their funding. This is especially true when the usefulness of the intangible assets has yet to be proven. Sometimes the market is extremely optimistic about some intangible assets, but otherwise firms with unproven intangible assets may be better off funding themselves privately. This evolution has a downside: investors limited to public markets are cut off from investing in high intangible†asset firms. Additionally, as fewer firms remain publicly listed, fewer firms will be transparent to society.

Suggested Citation

  • Craig Doidge & Kathleen M. Kahle & G. Andrew Karolyi & René M. Stulz, 2018. "Eclipse of the Public Corporation or Eclipse of the Public Markets?," Journal of Applied Corporate Finance, Morgan Stanley, vol. 30(1), pages 8-16, March.
  • Handle: RePEc:bla:jacrfn:v:30:y:2018:i:1:p:8-16
    DOI: 10.1111/jacf.12272

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    Blog mentions

    As found by, the blog aggregator for Economics research:
    1. Sources of Finance: Internal versus External
      by Steve Cecchetti and Kim Schoenholtz in Money, Banking and Financial Markets on 2018-08-20 12:13:28


    Citations are extracted by the CitEc Project, subscribe to its RSS feed for this item.

    Cited by:

    1. Aldatmaz,Serdar & Brown,Greg W. & Demirguc-Kunt,Asli, 2020. "Determinants of International Buyout Investments," Policy Research Working Paper Series 9191, The World Bank.
    2. Michael Ewens & Joan Farre-Mensa, 2019. "The Deregulation of the Private Equity Markets and the Decline in IPOs," NBER Working Papers 26317, National Bureau of Economic Research, Inc.
    3. Hamdani, Assaf & Lauterbach, Beni & Mugerman, Yevgeny, 2020. "Reservation prices in shareholders’ response to freeze-out tender offers," Journal of International Financial Markets, Institutions and Money, Elsevier, vol. 64(C).
    4. Paolo Finaldi Russo & Fabio Parlapiano & Daniele Pianeselli & Ilaria Supino, 2020. "Firms’ listings: what is new? Italy versus the main European stock exchanges," Questioni di Economia e Finanza (Occasional Papers) 555, Bank of Italy, Economic Research and International Relations Area.
    5. Fu, Jiangtao & Ogura, Yoshiaki, 2019. "Are Japanese companies less risky and less profitable than US companies? Evidence from a matched sample," Japan and the World Economy, Elsevier, vol. 51(C), pages 1-1.

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