Working Paper: NBER ID: w22857
Authors: Kathleen Kahle; Ren M. Stulz
Abstract: We examine the current state of the U.S. public corporation and how it has evolved over the last 40 years. After falling by 50 percent since its peak in 1997, the number of public corporations is now smaller than 40 years ago. These corporations are now much larger and over the last twenty years have become much older; they invest differently, as the average firm invests more in R&D than it spends on capital expenditures; and compared to the 1990s, the ratio of investment to assets is lower, especially for large firms. Public firms have record high cash holdings and, in most recent years, the average firm has more cash than long-term debt. Measuring profitability by the ratio of earnings to assets, the average firm is less profitable, but that is driven by smaller firms. Earnings of public firms have become more concentrated – the top 200 firms in profits earn as much as all public firms combined. Firms’ total payouts to shareholders as a percent of earnings are at record levels. Possible explanations for the current state of the public corporation include a decrease in the net benefits of being a public company, changes in financial intermediation, technological change, globalization, and consolidation through mergers.
Keywords: public corporation; financial intermediation; technological change; globalization; mergers
JEL Codes: D22; G24; G30
Edges that are evidenced by causal inference methods are in orange, and the rest are in light blue.
| Cause | Effect |
|---|---|
| decrease in net benefits (J32) | decrease in the number of public corporations (L32) |
| technological change (O33) | decrease in the number of public corporations (L32) |
| globalization (F60) | decrease in the number of public corporations (L32) |
| decrease in the number of public corporations (L32) | reduced reliance on public markets for capital (O16) |
| increased cash holdings (G32) | reduced reliance on public markets for capital (O16) |
| size of firms (L25) | profitability (L21) |
| larger firms (L25) | different causal pathway affecting profitability (L21) |