The Stock Market Is: Smaller, With Fewer, Bigger Winners, Mostly Losers, And Fewer Upstarts

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Because the population of the United States has grown nearly 50 percent since 1976, the drop is even starker on a per-capita basis: There were 23 publicly listed companies for every million people in 1975, but only 11 in 2016, according to Professor Stulz.

This puts the United States "in bad company in terms of the percentage decrease in listings -- just ahead of Venezuela," he said. "Given the size of the United States, its economic development, financial development and its respect for shareholder rights," he added, one might expect that tally to be climbing, not falling.

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"The headline is that the number of public firms is shrinking, but it's not just that," [said René Stulz, an Ohio State finance professor]. Profits in the overall market are now divided among fewer winners. And as capital-intensive companies have been supplanted by those whose value is largely found in their intellectual property, the marketplace is less transparent -- with troubling consequences.

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The companies on the market today are, on average, much larger than the public corporations of decades ago. Fast-rising upstarts are harder to find.

In 1975, 61.5 percent of publicly traded firms had assets worth less than $100 million, using inflation-adjusted 2015 dollars. But by 2015, that proportion had dropped to only 22.6 percent.

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Profits are increasingly concentrated in the cluster of giants -- with Apple at the forefront -- that dominate the market. For a far larger assortment of smaller companies, though, profit is often out of reach. In 2015, for example, the top 200 companies by earnings accounted for all of the profits in the stock market, according to calculations by Kathleen Kahle, a professor of finance at the University of Arizona, and Professor Stulz. In aggregate, the remaining 3,281 publicly listed companies lost money.

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Without deep knowledge of a company's critical research -- which businesses may be reluctant to share, for competitive reasons -- it's difficult for outsiders to evaluate a start-up's worth. That makes it harder to obtain funding, and it may be partly responsible for certain trends: why there are fewer initial public offerings these days, why smaller companies are being swallowed by the giants, and why so many companies remain private for longer.