Private equity: rethinking the neoclassical axioms of capital markets

By all measures, the continuous growth and expansion of private equity has been astounding; the industry has grown approximately 200-fold in less than a quarter century. Once regarded as a small blip at the margin of alternative investments, private equity has now moved to the center stage of capital markets. Although private equity prospers, the number of listed firms has shown a sharp decline in the United States of nearly 50% over the last 20 years. The two contrasting trends are not independent phenomena and put into question the fundamentals of neo-classical finance theory, notably Berle and Means’ influential theory of the modern corporation and the separation of ownership and control