Private Companies’ Profits Outpace Public Firms, Fed Study Shows
- San Francisco Fed paper looks at profit, financing costs gap
- Private returns surpassed public firms’ by 10 ppts after 2000
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Publicly traded companies’ profits fell along with interest rates over the last four decades, while profit rates for privately-held firms climbed “substantially,” according to researchers for the Federal Reserve Bank of San Francisco.
This implies that private companies have made up the difference, either by increasing their market power or their risk, economists Anton Bobrov, Carter Davis, Alexandre Sollaci, and James Traina wrote in a working paper published Monday on the San Francisco Fed’s website.