Dissecting the Listing Gap: Mergers, Private Equity, or Regulation?

The abnormal decline in the number of US public firms is often blamed on merger activity, private equity investments, and stock market regulations. We compare and quantify the effects of these channels on the evolution of the US listing gap in a unified framework. In the US, an extra 100 mergers is associated with 41.56 additional missing public firms, whereas an extra 100 private equity deals is associated with 7.83 fewer missing listings. Regulatory changes, particularly the Sarbanes–Oxley Act of 2002, are also estimated to have a significant role in the decline of US listings. We also specify the types of mergers and private equity deals that most strongly affect listings in the US. Finally, we document that listing gaps emerge in other developed economies, with a few years of delay. The non-US listing gaps are driven by similar forces as in the US.