Laws that deter companies from going public cost our economy dearly
Over the past 20 years, the U.S. has made it much more costly for public corporations to comply with the array of regulations that govern their behavior. Unsurprisingly, this has led to fewer companies choosing to become publicly traded, and that development has hurt the U.S. economy.
That we are continuing to add to the burdensome reporting requirements for public companies means this trend likely will accelerate and the U.S. economy will pay a price with fewer jobs created, lower productivity and wages, and greater wealth inequality.
For decades, the standard story for a successful start-up business entailed reaching the stage when investors took the company public by selling shares via an initial public offering. Not only does becoming a publicly-traded corporation allow its founders and early investors the opportunity to cash in, but the corporate structure and governance of a publicly-traded firm provides advantages to help the company continue its growth.
For example, the requirement of regular audits and concomitant obeisance to generally accepted accounting principles , a board with at least nominal independence, and the stock market’s liquidity help make investment in a public company more attractive and reduce its capital costs. But with the cost of becoming a publicly-traded […]