Impact of stock exchange listing on financial stability of small and medium enterprises: evidence from BSE SME platform in India

The study empirically investigates the impact of stock exchange listing on the financial stability of Indian Small and Medium Enterprises (SMEs). The study uses an unbalanced panel of sixty-four listed Indian SMEs from 2012 to 2023 and seeks to explore the performance of the selected SMEs before and after listing. It explores the impact of listing in two ways: first, using a fixed-effects panel regression it explores if listing helps SMEs improve their financial stability and second, using a fixed-effects ordered logit regression it explores if listing helps SMEs enter a higher zone of financial stability. Financial stability is measured by Altman's Z??-Score (2005). The Z??-Scores are used as the dependent variable in the first model while Z??-Score zones are used as ordered dependent variable in the second model. The listing dummy is the main independent variable for both models, the study uses control variables including company-related factors and macroeconomic variables including a pandemic dummy. The study finds significant impact of stock exchange listing in improving SMEs' financial stability and helping them enter a higher financial stability zone. Hence, the study suggests that access to capital market can benefit SMEs to raise funds through newer channels, and thus can enhance their financial stability by lowering the probability of failure faced through obstacles in accessing external finance. The insignificant pandemic dummy shows risk-resilient nature of SMEs.