Fewer Firms

small business In 1980, there were 4,500 public corporations in the US. That number steadily increased, peaking at 7,355 in 11/97. Since then it has steadily declined, and today there are slightly more than 3,500. Most of the decline can be traced to the precipitous fall in number of microcap firms as they have difficulty competing with huge corporations and enjoy early backing by private equity and venture-capital. The losers, small investors.

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  1. Andrew Holliday says

    Not entirely persuaded. By ‘public corporation”, do you mean any corporation registered in some state, any coporation that must register with the SEC to issue securities, or any any publicly traded corporation (implying there are fewer than 5,000 stocks in the Wilshire 5,000)? Do LLCs count?

    I ask about LLCs because so many startup companies have that form when they first search for funding. Registered with a state and the SEC, but not listed. Then, if the new company takes off, it is bought by Google or its kind. This is not a loss for investors (except, perhaps in Google). And these are not small investors. The non-entrepreneurial investors have substantial assets; that’s why their money is sought, and why they can often afford the risk.

    Though acquisition is one obvious target to blame for the decline in corporation count by any measure, it may actually just be a reflection of economic activity, accompanied by post-recession risk-aversion.

    I’m glad I faced no 70-word limit!

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