Working Paper No. 1115

The Incredible Shrinking Stock Market: On the Political Economy Consequences of Excessive Delistings

Published: March 4, 2016, revised November 2016 and February 2018Pages: 47Keywords: Political economy; Stock market; Delistings; Corporate investment; ProductivityJEL-codes: G34; G24; P16

The Incredible Shrinking Stock Market: On the Political Economy Consequences of Excessive Delistings Alexander Ljungqvist, Lars Persson and Joacim Tåg


Over the past two decades, the U.S. stock market has halved in size as the “public firm model” has begun to fall out of favor. We develop a political economy model of delistings from the stock market to study the wider economic consequences of this trend. We show that the private and social incentives to delist firms from the stock market need not be aligned. Delistings can inadvertently impose an externality on the economy by reducing citizen-investors’ exposure to corporate profits and thereby undermining popular support for business-friendly policies. A shrinking stock market can trigger a chain of events that leads to long-term reductions in aggregate investment, productivity, and employment.

Interdisciplinary European Studies

The European Union in a Changing World Order

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This book explores how the European Union responds to the ongoing challenges to the liberal international order. These challenges arise both within the EU itself and beyond its borders, and put into question the values of free trade and liberal democracy. 

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