The Dodd-Frank Act and the Private Company Discount: An Empirical Investigation

Abstract

ABSTRACT There has been a great deal of criticism about the Dodd-Frank Wall Street Reform and Consumer Protection Act of 2010 (DFA) which focuses on the negative impact it had on small public companies (see Bordo and Duca 2018). This study uses acquisition data to perform an empirical investigation into whether the DFA impacted the value of private companies. The results present statistically significant evidence that the purchase price discount for non-public firms was greater Post-DFA. The evidence presents support for the opinion that the DFA was more harmful to private companies than it was to public companies. It also supports the existent academic literature, tax court, federal regulator, and valuation practitioner views that private company acquisitions should include a discount for lack of marketability due to the illiquid nature of private companies.