Is Wall Street a Dead End?

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By now you have probably already heard that Deutsche Börse, a giant German exchange, is buying the New York Stock Exchange, creating a company worth some $24 billion and that this news arrived shortly after the Dow broke the 12,000-point barrier for the first time since before the financial crisis.  But does this mean that Wall Street market exchanges are healthy?  According to Felix Salmon, a finance blogger at Reuters, the glory days of publicly traded companies dominating the American business landscape may be over. The number of companies listed on the major domestic exchanges peaked in 1997 at more than 7,000, and it has been falling ever since.

Questions:

1.  Based on the video and the article, what are the overarching reasons for Mr. Salmon’s opinion about Wall Street? Do you agree or disagree?  Why or why not?

2.  Explain public versus private sources of funds for companies. Does the accounting for these sources differ?

3.   Mr. Salmon submits, “And companies love how private markets allow them to avoid much of the regulatory burden of being public.” Discuss this statement in terms of the Sarbanes Oxley Act (SOX) and its costs and benefits.

4.  What affect do you think IFRS will have on this stock market situation? Discuss.

Sources:

Salmon, F. (2011). Wall Street’s Dead End, The New York Times, February 13. (Retrievable online at http://www.nytimes.com/2011/02/14/opinion/14Salmon.html?_r=2&scp=1&sq=Felix%20salmon&st=cse)

NYT Video (2011). Viewpoints: Wall Street’s Dead End? (Retrievable online at http://video.nytimes.com/video/playlist/business/1194811622255/index.html)