Capital Romance: Why Wall Street Fell in Love With Higher Education
Andreas Ortmann ()
Education Economics, 2001, vol. 9, issue 3, 293-311
With about two initial public offerings per year, the number of publicly traded degree-granting providers of post-secondary education in the United States has grown steadily ever since the Apollo Group (University of Phoenix, College of Financial Planning, etc.) went public in December 1994. To sell to investors ownership in companies that compete against traditional providers who do not have to produce profits to please investors and are favored by numerous regulatory and tax breaks (including tax-deductible donations), investment bankers and market analysts clearly must have 'compelling' stories to tell. This paper presents an inventory of the arguments typically employed as well as an attempt to quantify their relative importance through a questionnaire that was sent to analysts following the education industry. I find that the market analysts' arguments are reasonably congruent with modern economic and managerial theories of firms and markets and what I consider the relevant facts.
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