The Changing Landscape of the U.S. Equity Markets: An Investigation Into how and why the Growing Private Equity Market has Taken over the Public Equity Market

Frederik Nicolas Fogtdal

Student thesis: Master thesis

Abstract

Historically, the public equity market has been the backbone of the financial industry since its inception. It has given the ability for firms to raise capital that was deployed for funding innovation that has led to some of the groundbreaking developments in many industries in our lifetime. It has been the most efficient and cheaper way for firms to raise equity because of its core fundamentals. The equity market is highly transparent as public firms are required to publish quarterly disclosures, hence all participants have access to the same information. Furthermore, the equity market is liquid as investors and firms can buy and sell stakes as simple as on a regular marketplace. Nevertheless, the public equity market has gone under scrutiny and been put into question whether as its efficiency has decreased. The growing private equity market seems to have become a viable alternative for firms seeking capital due to its increasing efficiency. The thesis deals with the development of the two markets and analyzes through applying the theory of financial markets why development has been so different. It aims to prove that the public equity market has indeed suffered a decline in efficiency which has led to its decrease in size and importance. On the other hand, the thesis aims to prove that the private equity market grown and has indeed become a viable and sustainable substitute equity market. The analysis has been conducted using past but recent academic research supported with current carefully gathered and analyzed data to support the research question that there is indeed a sustainable shift in the equity markets’ landscape.

EducationsMSc in Finance and Strategic Management, (Graduate Programme) Final Thesis
LanguageEnglish
Publication date2017
Number of pages111