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The Deregulation of the Private Equity Markets and the Decline in IPOs

Ewens, Michael and Farre-Mensa, Joan (2020) The Deregulation of the Private Equity Markets and the Decline in IPOs. Review of Financial Studies, 33 (12). pp. 5463-5509. ISSN 0893-9454.

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The deregulation of securities laws—in particular the National Securities Markets Improvement Act (NSMIA) of 1996—has increased the supply of private capital to late-stage private startups, which are now able to grow to a size that few private firms used to reach. NSMIA is one of a number of factors that have changed the going-public versus staying-private trade-off, helping bring about a new equilibrium where fewer startups go public, and those that do are older. This new equilibrium does not reflect an initial public offering (IPO) market failure. Rather, founders are using their increased bargaining power vis-à-vis investors to stay private longer.

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Additional Information:© The Author(s) 2020. Published by Oxford University Press on behalf of The Society for Financial Studies. This article is published and distributed under the terms of the Oxford University Press, Standard Journals Publication Model ( Received: 08 March 2018; Published: 09 May 2020; Published: 09 May 2020. We thank Jay Fishman, Will Gornall, Matthew Gustafson, Peter Iliev, Andrew Karolyi (the Editor), Stephen Karolyi, Stephen Keen, Sungjoung Kwon, Josh Lerner, Bob Long, Michelle Lowry, Michael Mani, John Morley, Ramana Nanda, Jay Ritter, Roberta Romano, Berk Sensoy, two anonymous referees, and audiences at the AEA Conference, the WFA Conference, the Jackson Hole Finance Conference, UC Berkeley’s Finance and Innovation Conference, the Finance, Organizations and Markets (FOM) Research Conference, the Institute for Private Capital Spring Research Symposium, the Washington University Corporate Finance Conference, ESMT’s 2nd Conference on Entrepreneurial Financial Management, the Securities and Exchange Commission, and several universities. We also thank Correlation Ventures and VentureSource for access to data, as well as Aleksandar Andonov, Yael Hochberg, and Joshua Rauh for their data on the composition of state pension fund boards. The VentureSource data were provided by Correlation Ventures, to which Ewens is an advisor and investor.
Issue or Number:12
Classification Code:JEL: G24; G28; G32
Record Number:CaltechAUTHORS:20200522-122829220
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Official Citation:Michael Ewens, Joan Farre-Mensa, The Deregulation of the Private Equity Markets and the Decline in IPOs, The Review of Financial Studies, Volume 33, Issue 12, December 2020, Pages 5463–5509,
Usage Policy:No commercial reproduction, distribution, display or performance rights in this work are provided.
ID Code:103419
Deposited By: Tony Diaz
Deposited On:22 May 2020 20:55
Last Modified:02 Dec 2020 19:26

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