Stock market concentration is stifling economic growth and innovation,聽according to new research from 91亚色鈥檚 Schulich School of Business.
The findings, published in聽Journal of Financial Economics,聽found that concentrated stock markets dominated by a small number of powerful firms are associated with less efficient capital allocation, as well as sluggish initial public offerings (IPOs), less innovation activity (as measured by patents), and slower economic growth overall. The study utilized three decades of data from 47 countries.
The research paper, titled 鈥,鈥 was co-authored by , professor of finance and Bob Finlayson Chair in International Finance at the Schulich School of Business; , professor of finance at Cornell University; and , assistant professor of finance at Boler College of Business at John Carroll University.
鈥淭he stock market should fund promising new firms, thereby breeding competition, innovation, and economic growth,鈥 said Bae. 鈥淏ut stock markets dominated by a few large firms are associated with declines in various measures of economic health, including patents, funding for new firms and economic growth.鈥
Adds Bae:聽鈥淭here is a growing concern among politicians, the media, and academia that the power and concentration of very large successful firms can have troubling consequences. Our findings validate such concern.鈥