3 ms·
> small companies aren’t going public because of the much larger regulatory burden or cost Do you mean, larger than staying private? Or larger than it used to
by forapurpose 8y ago
> small companies aren’t going public because of the much larger regulatory burden or cost
Do you mean, larger than staying private? Or larger than it used to be? Regarding either, I would guess that regulatory costs were much higher in the 1970s, before modern 'deregulation' and when the concept of government involvement in the economy was different, yet small companies' participation in the market was much higher then, according to the article:
* In 1975, 61.5 percent of publicly traded firms had assets worth less than $100 million, using inflation-adjusted 2015 dollars. But by 2015, that proportion had dropped to only 22.6 percent.
Also, are you aware of any evidence for it? (For other readers, the parent's link addresses another issue, the change in cost of small trades.) Unfortunately, regulation and its costs are such a politicized issue that I have a hard time finding reliable data (or any data).
EDIT: For a counterpoint, consider that regulation makes markets more attractive. For example, nobody would want to participate in a completely unregulated market, where theft and fraud were commonplace. Regulation, when implemented properly, makes markets safe for participants, protecting their investments.
- fauigerzigerk 8y agoI have no hard evidence one way or another, but I do remember that the introduction of Sarbanes-Oxley (2002) was a very big deal in terms of IT spending for years. SOX came as a reaction to Enron and WorldCom. I don't think this is necessarily a question of whether regulation as such is good or bad. It seems intuitively plausible to me that regulation like SOX can be both beneficial in terms of trust in the markets and a deterrent for smaller companies to go public.
- forapurpose 8y ago> It seems intuitively plausible to me that regulation like SOX can be both beneficial in terms of trust in the markets and a deterrent for smaller companies to go public. While I agree, I think the problem here is that many, many things are intuitively plausible. Maybe market fraud is increased and the markets are less safe for small businesses, or maybe policies or custom or collusion have cemented big players who have less interest in small companies. We need data and reason to sort the wheat from the chaff. Our intuitions suck. If they were good, we would have had the right physics in 1,000 BCE instead of 1900 CE. (Not my line, but a good one.)
- fauigerzigerk 8y agoI agree. Unfortunately it is extremely difficult to measure the effects of any particular regulation. It's a one-off, under very specific historical circumstances and it interacts with a huge number of equally unrepeatable events. I don't envy economists. No double-blind lab trials here. Even if we had Putnams Twin Earth our experiments would probably fail for some weird semantic reason :)
- majewsky 8y agoNot your original point, but as a physicist, I chuckle at the proposition that we had "the right physics" in 1900 CE. The turn of the century marks the discovery of quantum physics and relativity, demonstrating that we're not even close to "the right physics".
- forapurpose 8y agoYeah, I thought for about 15 seconds before choosing that date, but then decided it wasn't too important. Perhaps the better way to express it is, 'when did we not have the wrong physics'? When did we jettison alchemy and the rest forever in favor of modern science? I'd guess earlier than 1900, but I don't know. And of course, there are many gray areas.
- majewsky 8y ago> When did we jettison alchemy and the rest forever in favor of modern science? Wake me up when people stop believing in homeopathy.