The Decline of the Public Firm: Causes, Consequences, and Policy Implications

US and EU public stock markets have undergone significant transformations in recent years. The number of public companies has been decreasing in both jurisdictions, mostly because of private firms’ reduced propensity to go public. This paper, forthcoming as a chapter in the Research Handbook on Corporate Finance Law, edited by Daniele D’Alvia and expected to be published by Edward Elgar in late 2026, investigates this decline in firms’ propensity to go (or remain) public. It provides an overview and a critical analysis of the main causes of the decline, distinguishing between regulatory and non-regulatory causes, and offers some insights into its societal costs, highlighting how a lower number of public firms may favor a higher incidence of corporate misconduct and harmful firm externalities, more unequal access to investment opportunities, and reduced opportunities for retail investors to diversify their portfolios and mitigate investment risk. Against this background, the paper discusses the main regulatory responses put forward by EU and US policymakers and some of the causes that limit their effectiveness. The paper concludes by offering two suggestions for policymakers seeking to bring more firms into public markets: extending the reach of public company regulation to private companies exhibiting the core structural characteristics of public companies and linking costly sustainability-related regulations to company size rather than to public company status.