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Europe's 'New' Stock Markets

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  • Bottazzi, Laura
  • Da Rin, Marco

Abstract

The creation of Europe’s ‘new’ stock markets represents a major experiment in market design with important implications for the ability to support innovative, fast-growing companies. We evaluate the success of these markets based on a large number of measures of firm performance and strategy, which extend to several pre- and post-listing years. Our hand-collected database is obtained from the listing prospectuses and annual reports of 538 companies which listed on the Neuer Markt, Nouveau Marché, and Nuovo Mercato from 1996 through 2001. Three findings stand out. First, these companies experience a dramatic change after the Initial Public Offering (IPO), re-balancing their capital structure, increasing their debt and investment, accelerating growth, and becoming less profitable. These changes are consistent with the existence of credit constraints, and are greater than for companies listing on the ‘main’ markets. Second, we document a considerable variation in post-IPO growth rates and corporate strategy, across both companies and markets. This variation is largely due to the ability to raise equity capital at IPO. Third, the adoption of US GAAP accounting standards substantially increases firms’ ability to raise capital. While Europe’s ‘new’ markets have provided high-growth companies with an unprecedented opportunity to finance their growth, the adoption (and enforcement) of tighter standards of disclosure is then crucial for their success.

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Paper provided by C.E.P.R. Discussion Papers in its series CEPR Discussion Papers with number 3521.

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Date of creation: Aug 2002
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Handle: RePEc:cpr:ceprdp:3521

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Keywords: accounting standards; corporate disclosure; going public; Initial Public Offerings (IPOs); operating performance; ownership; stock markets;

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References

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  1. Pagano, Marco & Panetta, Fabio & Zingales, Luigi, 1996. "Why Do Companies Go Public? An Empirical Analysis," CEPR Discussion Papers 1332, C.E.P.R. Discussion Papers.
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Citations

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Cited by:
  1. Da Rin, Marco & Nicodano, Giovanna & Sembenelli, Alessandro, 2005. "Public policy and the creation of active venture capital markets," Working Paper Series 0430, European Central Bank.
  2. Arianna Martinelli & Martin Meyer & Nick Tunzelmann, 2008. "Becoming an entrepreneurial university? A case study of knowledge exchange relationships and faculty attitudes in a medium-sized, research-oriented university," The Journal of Technology Transfer, Springer, vol. 33(3), pages 259-283, June.
  3. Andrea Schertler, 2003. "Driving Forces of Venture Capital Investments in Europe: A Dynamic Panel Data Analysis," Kiel Working Papers 1172, Kiel Institute for the World Economy.
  4. Cécile Carpentier & Jean-Marc Suret, 2009. "The Survival and Success of Canadian Penny Stock IPOs," CIRANO Working Papers 2007s-28, CIRANO.
  5. Laura Bottazzi & Marco da Rin, 2003. "Financing Entrepreneurial Firms in Europe: Facts, Issues, and Research Agenda," CESifo Working Paper Series 958, CESifo Group Munich.
  6. Oehler, Andreas & Rummer, Marco & Smith, Peter N., 2004. "IPO Pricing and the Relative Importance of Investor Sentiment: Evidence from Germany," Discussion Papers 26, University of Bamberg, Chair of Finance.
  7. de Carvalho, Antonio Gledson & Pennacchi, George G., 2012. "Can a stock exchange improve corporate behavior? Evidence from firms' migration to premium listings in Brazil," Journal of Corporate Finance, Elsevier, vol. 18(4), pages 883-903.

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