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Private Equity's Unintended Dark Side: On the Economic Consequences of Excessive Delistings

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Listed:
  • Alexander Ljungqvist
  • Lars Persson
  • Joacim Tåg

Abstract

Over the past two decades, the U.S. stock market has been shrinking as the public firm model has begun to fall out of favor. We develop a political economy model of delistings to study the wider economic consequences of this trend. We show that the private and social incentives to delist firms from the stock market need not be aligned. Delistings can inadvertently impose an externality on the economy by reducing citizen-investors’ exposure to corporate profits and thereby undermining popular support for business-friendly policies. By facilitating companies’ departures from the stock market, private equity firms can trigger a chain of events that may lead to long-term reductions in aggregate investment, productivity, and employment.

Suggested Citation

  • Alexander Ljungqvist & Lars Persson & Joacim Tåg, 2016. "Private Equity's Unintended Dark Side: On the Economic Consequences of Excessive Delistings," NBER Working Papers 21909, National Bureau of Economic Research, Inc.
  • Handle: RePEc:nbr:nberwo:21909
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    References listed on IDEAS

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    More about this item

    JEL classification:

    • G24 - Financial Economics - - Financial Institutions and Services - - - Investment Banking; Venture Capital; Brokerage
    • G34 - Financial Economics - - Corporate Finance and Governance - - - Mergers; Acquisitions; Restructuring; Corporate Governance
    • P16 - Economic Systems - - Capitalist Systems - - - Political Economy of Capitalism

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