The decline in stock exchange listed firms

The number of exchange-listed firms has declined dramatically in the U.S. We argue that increases in payroll cost decrease the firm’s output and consequently, the need for capital. Thus, fewer new firms list on exchanges. Similarly, more firms delist as payroll costs reduce profits. We find empirical results that support our hypotheses. The results are stronger when firms are located in areas with greater regulatory restrictions on residential use of land - suggesting that increases in payroll costs is one of the factors driving this phenomenon.