Europe's Second Markets for Small Companies |
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Authors: | Silvio Vismara Stefano Paleari Jay R Ritter |
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Institution: | 1. Department of Economics and Technology Management and CCSE, University of Bergamo, Italy, and University of Augsburg, GermanyEmail: silvio.vismara@unibg.it;2. Warrington College of Business Administration, University of Florida, USA |
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Abstract: | European stock exchanges have repeatedly opened second markets to list small companies. We explain the motivation for the creation of these second markets, and the reasons why many of them have failed. We find that the average long‐run performance of initial public offerings (IPOs) on second markets is dramatically worse than for main market IPOs. However, the second markets have provided firms with the opportunity to raise funds at the IPO and in follow‐on offerings. The relative success of London's AIM, which is an exchange‐regulated market with minimal regulations, has led other European stock exchanges to establish similar non‐EU regulated second markets. Most of the IPOs on these exchange‐regulated markets are offered exclusively to institutional investors, and are equivalent to private placements. These IPOs, which frequently raise only a few million euros, rarely develop liquid trading. |
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Keywords: | stock exchanges second markets financial regulation IPOs AIM London Stock Exchange Neuer Markt G15 G30 |
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