The stock market and the health of publicly traded companies are often treated as key indicators of the state of the U.S. economy. The Dow Jones Industrial Average hits a new high and the financial press celebrates. Looking only at the status of stock markets is a problem, however, because the distribution of stock ownership is highly unequal in our society. And this isn’t the only problem with using the performance of public companies as proxies for the broader economy. The declining number of companies listed on stock markets over the past two decades—a fall of almost 15 percent—may well mean that public companies are playing a different kind of role in the U.S. economy.

In a working paper published last week, economists Craig Doidge of the University of Toronto, Andrew Karolyi of Cornell University, and René M. Stulz of The Ohio State University document the trends in public listings of companies in the United States. Their top-line result is that the number of publically listed U.S. companies peaked in 1996 and has been declining ever since. The three authors find two reasons for the decline—the number of firms seeking new listings has fallen and the number of public firms delisting from stock exchanges has risen. Think of a bathtub with less water pouring into the tub from the spigot while more water drains out of the bottom. About 55 percent of the lower level of listed firms is because fewer listed firms are flowing into the tub, and 45 percent is due to more firms going down the drain.

Let’s first look at the possible reasons behind companies going down the drain. These could be firms that simply go out of existence for one reason or another or return to being privately held firms. The authors find that the increase in the delisting rate is because listed firms are getting acquired at a much higher rate than in the past. Who are buying these firms? Doidge, Karolyi, and Stulz rule out private equity firms as major contributors to the trend and point instead to other listed companies as the buyers of these disappearing listed companies. Mergers and acquisitions between and among publicly listed firms seems to explain the bulk of delistings.

So what explains dwindling number of initial public offerings, or IPOs, on U.S. stock exchanges by companies? In other words, why is the IPO flow out of the spigot so weak? Some policymakers argued that small firms faced hurdles in raising funds prior to a possible IPO. This was the line of thinking that led to the passage of the Jumpstart our Business Startups Act in 2012, which now enables private firms to crowd source private funding from a range of individuals rather than relying on venture capital firms or exceedingly wealthy “angel” investors before going public. Yet Doidge, Karolyi, and Stulz find that private firms of all sizes are less likely to be publically listed, which means access to start-up capital isn’t the problem for these firms.

The three authors, however, do not settle on alternative explanations. As Cardiff Garcia at FT Alphaville writes the authors and other researchers and analysts “can only speculatively offer explanations that have been suggested in many other places.” In other words, no one is really sure.

Nonetheless. the authors of the paper do point out that a declining number of listed firms in the United States has implications for how economists measure the importance of public financial markets and publicly listed companies in the broader U.S. economy. Their findings could be a wake-up call to think more about the evolving role of public financial markets and firms. If stock markets are decreasingly important for the funding of the businesses that many Americans work at day in and day out, then it requires new thinking about the growing role of private companies and also the possible out-sized role of the remaining public companies as they grow via acquisitions.