Moritz May

We link firms’ incentives to list in public capital markets to household wealth allocation. For the period 1990-2020, we document a tight link between the prevalence of private firms in the US and US household sector wealth allocated to private businesses. The latter is driven by rich households who (i) own a large share of total household wealth and (ii) allocate disproportionate shares of their portfolio to private businesses. In micro data on startups, we confirm that wealthy founders seek less external liquidity, and that private firms with larger founder ownership delay public listing. We quantify the macroeconomic role of household wealth concentration for firms’ listing decision using a calibrated general equilibrium model of heterogeneous firms and households. Counterfactual analysis attributes approximately a third of the decline in US public firms between the 1990s and 2010s to rising household wealth concentration. Our model also highlights how limited financial intermediation between illiquid private markets and the public can reduce welfare by curtailing households’ access to liquid saving opportunities.