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The creation and evolution of entrepreneurial public markets

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  • Bernstein, Shai
  • Dev, Abhishek
  • Lerner, Josh

Abstract

This paper explores the creation and evolution of new stock exchanges around the world geared toward entrepreneurial companies, known as second-tier exchanges. Using hand-collected novel data, we show the proliferation of these exchanges in many countries, their significant volume of Initial Public Offerings (IPOs), and lower listing requirements. Shareholder protection strongly predicted exchange success, even in countries with high levels of venture capital activity, patenting, and financial market development. Better shareholder protection allowed younger, less-profitable, but faster-growing, companies to raise more capital. These results highlight the importance of institutions in enabling the provision of entrepreneurial capital to young companies.

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  • Bernstein, Shai & Dev, Abhishek & Lerner, Josh, 2020. "The creation and evolution of entrepreneurial public markets," Journal of Financial Economics, Elsevier, vol. 136(2), pages 307-329.
    • Handle: RePEc:eee:jfinec:v:136:y:2020:i:2:p:307-329
    DOI: 10.1016/j.jfineco.2019.10.002
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    Cited by:

    1. Yuji Honjo & Koki Kurihara, 2023. "Graduation of initial public offering firms from junior stock markets: evidence from the Tokyo Stock Exchange," Small Business Economics, Springer, vol. 60(2), pages 813-841, February.
    2. Massimo G. Colombo & Benedetta Montanaro & Silvio Vismara, 2023. "What drives the valuation of entrepreneurial ventures? A map to navigate the literature and research directions," Small Business Economics, Springer, vol. 61(1), pages 59-84, June.
    3. Alessandra Iannamorelli & Stefano Nobili & Antonio Scalia & Luana Zaccaria, 2024. "Asymmetric Information and Corporate Lending: Evidence from SME Bond Markets," Review of Finance, European Finance Association, vol. 28(1), pages 163-201.
    4. Vincenzo Butticè & Silvio Vismara, 2022. "Inclusive digital finance: the industry of equity crowdfunding," The Journal of Technology Transfer, Springer, vol. 47(4), pages 1224-1241, August.
    5. Albert N. Link & Martijn Hasselt & Silvio Vismara, 2021. "Going public with public money," Small Business Economics, Springer, vol. 57(3), pages 1419-1426, October.
    6. Chemmanur, Thomas J. & Signori, Andrea & Vismara, Silvio, 2023. "The exit choices of European private firms: A dynamic empirical analysis," Journal of Financial Markets, Elsevier, vol. 65(C).
    7. Potts Mark D & Affholter Joseph A & Harless Sydney, 2021. "Entrepreneurship Factors Among Developed Countries and Emerging Regions," South East European Journal of Economics and Business, Sciendo, vol. 16(2), pages 82-100, December.
    8. Luana Zaccaria & Simone Narizzano & Francesco Savino & Antonio Scalia, 2024. "From Public to Internal Capital Markets: The Effects of Affiliated IPOs on Group Firms," Mercati, infrastrutture, sistemi di pagamento (Markets, Infrastructures, Payment Systems) 49, Bank of Italy, Directorate General for Markets and Payment System.
    9. Wolfgang Bessler & Johannes Beyenbach & Marc Steffen Rapp & Marco Vendrasco, 2023. "Why do firms down-list or exit from securities markets?," Review of Managerial Science, Springer, vol. 17(4), pages 1175-1211, May.
    10. Fisch, Christian & Meoli, Michele & Vismara, Silvio & Block, Jörn H., 2022. "The effect of trademark breadth on IPO valuation and post-IPO performance: an empirical investigation of 1510 European IPOs," Journal of Business Venturing, Elsevier, vol. 37(5).
    11. Bessler, Wolfgang & Beyenbach, Johannes & Rapp, Marc Steffen & Vendrasco, Marco, 2021. "The global financial crisis and stock market migrations: An analysis of family and non-family firms in Germany," International Review of Financial Analysis, Elsevier, vol. 74(C).
    12. Fu, Xiaoqing Maggie & Harrison, Richard T. & Li, Dongfu Franco, 2022. "Venture capital investment in university spin-offs: Evidence from an emerging economy," Journal of Corporate Finance, Elsevier, vol. 74(C).
    13. Hu, Xiao & Wang, Jiayi & Wu, Banggang & Xiang, Shuting, 2023. "Venture capital firms' lead orientation and entry to new investment markets," Pacific-Basin Finance Journal, Elsevier, vol. 82(C).
    14. Carpentier, Cécile & Suret, Jean-Marc, 2019. "On the performance of a stepping-stone market," Research in International Business and Finance, Elsevier, vol. 50(C), pages 226-239.
    15. Peter‐Jan Engelen & Michele Meoli & Andrea Signori & Silvio Vismara, 2020. "The effects of stricter regulation on the going public decision of small and knowledge‐intensive firms," Journal of Business Finance & Accounting, Wiley Blackwell, vol. 47(1-2), pages 188-217, January.

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    More about this item

    Keywords

    Initial public offering; Venture capital; Innovation; Start-up;
    All these keywords.

    JEL classification:

    • G24 - Financial Economics - - Financial Institutions and Services - - - Investment Banking; Venture Capital; Brokerage
    • G28 - Financial Economics - - Financial Institutions and Services - - - Government Policy and Regulation
    • L26 - Industrial Organization - - Firm Objectives, Organization, and Behavior - - - Entrepreneurship

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