Finance and Economics Discussion Series (FEDS)
Disclosure Regulation, Intangible Capital and the Disappearance of Public Firms
Sara Casella, Hanbaek Lee, Sergio Villalvazo
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.
Keywords: Intangible capital, corporate disclosures, technology diffusion
PDF: Full Paper
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