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Capital Romance: Why Wall Street Fell in Love With Higher Education


  • Andreas Ortmann


With about two initial public offerings per year, the number of publicly traded degree-granting providers of post-secondary education in the United States has grown steadily ever since the Apollo Group (University of Phoenix, College of Financial Planning, etc.) went public in December 1994. To sell to investors ownership in companies that compete against traditional providers who do not have to produce profits to please investors and are favored by numerous regulatory and tax breaks (including tax-deductible donations), investment bankers and market analysts clearly must have 'compelling' stories to tell. This paper presents an inventory of the arguments typically employed as well as an attempt to quantify their relative importance through a questionnaire that was sent to analysts following the education industry. I find that the market analysts' arguments are reasonably congruent with modern economic and managerial theories of firms and markets and what I consider the relevant facts.

Suggested Citation

  • Andreas Ortmann, 2001. "Capital Romance: Why Wall Street Fell in Love With Higher Education," Education Economics, Taylor & Francis Journals, vol. 9(3), pages 293-311.
  • Handle: RePEc:taf:edecon:v:9:y:2001:i:3:p:293-311 DOI: 10.1080/09645290110086153

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    References listed on IDEAS

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    7. Holmstrom, Bengt R. & Tirole, Jean, 1989. "The theory of the firm," Handbook of Industrial Organization,in: R. Schmalensee & R. Willig (ed.), Handbook of Industrial Organization, edition 1, volume 1, chapter 2, pages 61-133 Elsevier.
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    10. Ortmann, Andreas & Squire, Richard, 2000. "A game-theoretic explanation of the administrative lattice in institutions of higher learning," Journal of Economic Behavior & Organization, Elsevier, vol. 43(3), pages 377-391, November.
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    Cited by:

    1. Andreas Ortmann & Katarína Svítková, 2007. "Certification as a Viable Quality Assurance Mechanism in Transition Economies: Evidence, Theory, and Open Questions," Prague Economic Papers, University of Economics, Prague, vol. 2007(2), pages 99-114.
    2. Jacqmin, Julien, 2014. "The Emergence of For-Profit Higher Education Institutions," MPRA Paper 59299, University Library of Munich, Germany.

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