US public companies (1976 – 2016)

The following chart and table reflect the  reduction in the number of public companies included in the total US stock market over the forty year period between 1976 and 2016. The most commonly cited factors in reducing the number of stocks include:

    •  An increase in the number of  corporate mergers and acquisitions over the period.
    • A decrease in initial public offerings over the period.

An increase in regulation (Sarbanes-Oxley in 2002) has also increased the costs of listing a stock, although the decrease in the number of stocks preceded the law’s enactment.¹ Relatively light enforcement of anti-trust regulation has coincided with increased merger and acquisition activity.

Total US Market

Year Number of companies
1976 4796
1977 4710
1978 4622
1979 4563
1980 4711
1981 5067
1982 4999
1983 5573
1984 5690
1985 5650
1986 5930
1987 6221
1988 5954
1989 5767
1990 5631
1991 5668
1992 5795
1993 6329
1994 6628
1995 6856
1996 7352
1997 7459
1998 7234
1999 7093
2000 6638
2001 6054
2002 5668
2003 5216
2004 4978
2005 4999
2006 4964
2007 4843
2008 4593
2009 4201
2010 3893
2011 3745
2012 3604
2013 3653
2014 3776
2015 3960
2016 3833

Data: 1976 – 1995 Credit Suisse; 1996 – 2016 Vanguard annual report filings. Link to  Spreadsheet

Effects of shrinkage

The shrinking public market of stocks has affected the market in a number of ways.

  • The market is now more concentrated than it was in 1976. As measured by the Herfindahl–Hirschman Index (HHI),  a commonly accepted measure of market concentration,  the HHI for public firms in the U.S. was more than 1,000 in 1976, dropped to about 800 in 1996, and rose to roughly 1,200 in 2016.²
  •  Listed companies are are now older and larger. The average age of a company measured from the time of listing is currently 18 years old, up from 12 years old in 1996. Today’s mean market capitalization is almost $7 billion, more than 10 times the size of the typical company in 1976 measured in constant dollars.³

References

¹ The U.S. listing gap    (2012)  Craig Doidge, G. Andrew Karolyi, René M. Stulz

² ³ The Incredible Shrinking Universe of Stocks   (2017)  Michael J. Mauboussin, Dan Callahan, CFA, and Darius Majd, Credit Suisse

About

Barry Barnitz, administrator of both the Bogleheads® wiki and of Financial Page, a Bogleheads® blog

Posted in Market statistics
April 2017
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