Don’t Blame the Stock Market for Corporate Myopia
Public ownership and public borrowing are diminishing at U.S. companies. Research has unearthed some worrisome consequences of this trend.
Short-term thinking didn’t start here.
Photographer: Michael Nagle/BloombergPublicly listed companies have been disappearing, especially in the U.S., where the number of public firms has fallen to about 3,500 today from more than 7,500 in 1997. The trend is familiar, but there’s still plenty of disagreement over whether it’s a cause for concern.
One aspect of the debate involves the question whether public companies are forced by stock-market pressures to favor short-term gain instead of building patiently for sustainable success. Another is whether the trend toward private market activity is taking place in debt as well as equity. The short answers are no and yes, respectively.