The number of public companies filing their financial statements with the Securities and Exchange Commission has shrunk dramatically in recent decades, according to a new report.
The research firm Audit Analytics charted the decline in a blog post Monday, pointing out how the number of audit opinions from companies filing their financials with the SEC in accordance with the Securities Exchange Act of 1934 had plunged from 13,337 in 2000 to 8,094 in 2015, a nearly 40 percent decrease.
“The decline in public company counts has been an acknowledged trend for quite some time,” said the firm. “The mid to late 90’s represented a peak for public company listings, with a general downward trend forming following the tech-bubble. Using Audit Analytics’ Audit Opinions Database, we found that there were 5,243 fewer ’34 Act Filers in 2015 than in 2000, a decrease of just over 39%.”
Audit Analytics pointed to a number of reasons behind the trend. More companies deregistered than registered with the SEC in 14 of the 15 years between 2001 and 2015. The increased disclosure demands required by the Sarbanes-Oxley Act of 2002, particularly Section 404’s requirements for assessing the effectiveness of internal controls over financial reporting, probably also contributed to the decline. On the other hand, a provision in the JOBS Act of 2010 increased the threshold for requiring companies to report to the SEC, raising it from 500 to 2,000 shareholders. Increased M&A activity, a decline in initial public offerings, and more companies raising capital through private debt instead of public equity are other likely factors.
The figures raise questions about the future of the equity markets. “For how long can the public market stand to lose 3% of companies every year?” Audit Analytics asks.
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