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Listing Gaps, Merger Waves, and the Privatization of American Equity Finance


Time:4:00pm - 5:30pm, Apr 26, 2019

Venue:Room 359S, Overseas Exchange Center, Peking University

Speaker:William L. Megginson

(Michael F. Price College of Business, University of Oklahoma)



We document that the U.S. economy has experienced over the last 25 years sharply declining numbers of listed firms, extraordinary volumes of mergers and of pri-vate equity investments, and abnormally high aggregate valuations for U.S. listed corporations. We synthesize and empirically analyze these trends and their inter-connections and document the recent emergence of a new model of equity finance in the United States. We show that the listing gap identified by Doidge, Karolyi, and Stulz (2017) was caused by an unprecedented merger wave occurring between 1997-2001, which directly reduced the number of listed firms, and by the rise of the private equity industry, which curtailed new listings through IPOs. Our model of equity financing well explains changes in the number of listed U.S. firms before and after the 1997-2001 transition to a new equilibrium. We conclude that this new model of equity finance has yielded net financial and developmental benefits for the U.S. economy, although the merger waves have increased industrial con- centration and the privatization of equity finance has almost certainly increased income inequality. We conclude by presenting preliminary evidence that this new model of equity financing is emerging in other developed countries.



William Megginson is Professor and Price Chair in Finance at Michael F. Price College of Business at the University of Oklahoma. He is also the Saudi Aramco Chair Professor in Finance at King Fahd University of Petroleum and Minerals in Dhahran, Saudi Arabia. Professor Megginson's research interest has focused in recent years on the privatization of state-owned enterprises, sovereign wealth fund investments, energy finance, and investment banking principles and practices. He has published refereed articles in several top academic journals, including Journal of Finance, Journal of Financial Economics, Review of Financial Studies, Journal of Financial and Quantitative Analysis, and Journal of Economic Literature. He is an editor of Journal of Corporate Finance. He has served as a privatization consultant for the New York Stock Exchange, the OECD, the IMF, the World Federation of Exchanges, and the World Bank. Professor Megginson received his Ph.D. in finance degree from Florida State University in 1986.