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Disclosure Regulation, Intangible Capital and the Disappearance of Public Firms

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Abstract

Since the mid-1990s, the number of listed firms in the U.S. has halved, and their public disclosure has become opaquer. To explain these trends, we develop a general equilibrium model where the choices of going public or private and the transparency of voluntary disclosure are characterized analytically. In the equilibrium, the stock market with directed search and the private equity market with random search co-exist. According to the estimation, stricter disclosure regulation and increased intangible capital share are the key drivers of the observed patterns. Lastly, we characterize a policymaker’s trade-off between welfare and productivity and analyze the optimal policy.

Suggested Citation

  • Sara Casella & Hanbaek Lee & Sergio Villalvazo, 2023. "Disclosure Regulation, Intangible Capital and the Disappearance of Public Firms," Finance and Economics Discussion Series 2023-050, Board of Governors of the Federal Reserve System (U.S.).
    • Handle: RePEc:fip:fedgfe:96649
    DOI: 10.17016/FEDS.2023.050
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    References listed on IDEAS

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    1. Dambra, Michael & Field, Laura Casares & Gustafson, Matthew T., 2015. "The JOBS Act and IPO volume: Evidence that disclosure costs affect the IPO decision," Journal of Financial Economics, Elsevier, vol. 116(1), pages 121-143.
    2. Cyrus Aghamolla & Richard T. Thakor, 2022. "Do Mandatory Disclosure Requirements for Private Firms Increase the Propensity of Going Public?," Journal of Accounting Research, Wiley Blackwell, vol. 60(3), pages 755-804, June.
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    More about this item

    Keywords

    intangible capital; corporate disclosures; technology diffusion;
    All these keywords.

    JEL classification:

    • D24 - Microeconomics - - Production and Organizations - - - Production; Cost; Capital; Capital, Total Factor, and Multifactor Productivity; Capacity
    • G24 - Financial Economics - - Financial Institutions and Services - - - Investment Banking; Venture Capital; Brokerage
    • G38 - Financial Economics - - Corporate Finance and Governance - - - Government Policy and Regulation

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