While there are 20 percent more companies in the United States than the mid-1990s,the number of firms that are publicly traded on a major stock exchange has dropped 45 percent compared to 1995.Which of the following is one of the reasons why?

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Quizplus · Accepted Answer

Although in theory the takeover constraint is supposed to limit managerial opportunism, in recent years its effectiveness has become diluted as a result of a number of defense tactics adopted by incumbent management. A number of major firms, including Dell, Safeway, and PetSmart, went from being publicly traded to privately held firms in recent years. Other firms, such as Uber, have simply chosen to stay private for a longer period than successful startup firms did in the past. What is driving this change? Firm managers argue that being private gives them the freedom to think longer term and for the benefit of the firm as a whole, rather than simply maximizing the current stock price of the firm. It also removes the challenge of activist investors pushing the firm to take actions managers would prefer to avoid, and it lessens the threat of a hostile takeover.

While There Are 20 Percent More Companies in the United