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The Value Gap: Europe Cannot Scale

Author

Listed:
  • Bo Becker
  • Efraim Benmelech
  • Joao Monteiro

Abstract

In 2008, the aggregate market value of U.S.-listed firms was roughly one-third higher than that of European-listed firms. By 2023, it was more than 300% higher, a difference of $34 trillion. The valuation gap is broad-based, rather than concentrated among a few superstar firms, and is driven by differences in firm values, not in the number of listed firms. Across sectors, the gap is larger in R&D-intensive industries and in industries with high returns to scale. European firms’ size is strongly correlated with home-country GDP, whereas U.S. firms’ size is unrelated to home-state GDP. Smaller European firms also face a particularly large cost-of-capital gap and do not appear able to substitute debt for limited access to equity financing, including venture capital. Taken together, these facts suggest that financial and product-market frictions constrain European firms’ ability to scale.

Suggested Citation

  • Bo Becker & Efraim Benmelech & Joao Monteiro, 2026. "The Value Gap: Europe Cannot Scale," NBER Working Papers 35577, National Bureau of Economic Research, Inc.
    • Handle: RePEc:nbr:nberwo:35577
    Note: AP CF EFG IFM ITI PR
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    More about this item

    JEL classification:

    • G12 - Financial Economics - - General Financial Markets - - - Asset Pricing; Trading Volume; Bond Interest Rates
    • G15 - Financial Economics - - General Financial Markets - - - International Financial Markets
    • G32 - Financial Economics - - Corporate Finance and Governance - - - Financing Policy; Financial Risk and Risk Management; Capital and Ownership Structure; Value of Firms; Goodwill
    • O36 - Economic Development, Innovation, Technological Change, and Growth - - Innovation; Research and Development; Technological Change; Intellectual Property Rights - - - Open Innovation

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