Why Firms Have Less Incentive Now to Stay on Exchanges

We interview Jonathan Macey, who is Yale University's Sam Harris Professor of Corporate Law, Corporate Finance and Securities Law. Jonathan has authored several books on corporations and the law, and joins The Motley Fool to talk about his most recent work, The Death of Corporate Reputation.

A full transcript follows the video.

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Brendan Byrnes: You write in the book that a lot of firms have less incentive, now, to stay on exchanges. Why is that?

Jonathan Macey: It used to be -- one has to go back in history to even remember this -- it used to be that a primary motivation for listing on an exchange was that you got a reputational boost, if you're a company.

A company, say in Japan or the U.S., that listed on the Tokyo Stock Exchange or the New York Stock Exchange, this put that company on the map. People said, "Wow, this is a serious company," because they're a New York Stock Exchange-listed company. It was part of their marketing, and it really meant that a company had made it as a manufacturing entity, or a services entity, whatever the underlying business model happened to be.

Now it's just one of many, many trading venues. There's no reputational benefit to being on the New York Stock Exchange. That's just yet another reputational intermediary, like the credit rating agencies, that just don't serve that function anymore.

They're still around. They have a business function, which of course is to provide liquidity, but the reputational component of their business is just non-existent.