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Business Creation and the Stock Market

  • Michelacci, C.
  • Suarez, J.

We claim that the stock market encourages business creation, innovation, and growth by allowing the recycling of "informed capital". Due to incentive and information problems, new start-ups face high flotation costs. Sustaining a tight relationship with a monitor allows them to postpone their going public decision until profitability prospects are clearer of incentive problems are less severe.

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Paper provided by Centro de Estudios Monetarios Y Financieros- in its series Papers with number 0009.

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Length: 41 pages
Date of creation: 2000
Date of revision:
Handle: RePEc:fth:cemfdt:0009
Contact details of provider: Postal:
Centro de Estudios Monetarios Y Financieros. Casado del Alisal, 5-28014 Madrid, Spain.

Phone: 914290551
Fax: 914291056
Web page: http://www.cemfi.es/
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  23. Acemoglu, Daron & Zilibotti, Fabrizio, 1998. "Information Accumulation in Development," Seminar Papers 652, Stockholm University, Institute for International Economic Studies.
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  25. Petersen, Mitchell A & Rajan, Raghuram G, 1994. " The Benefits of Lending Relationships: Evidence from Small Business Data," Journal of Finance, American Finance Association, vol. 49(1), pages 3-37, March.
  26. Jensen, Michael C, 1986. "Agency Costs of Free Cash Flow, Corporate Finance, and Takeovers," American Economic Review, American Economic Association, vol. 76(2), pages 323-29, May.
  27. Acemoglu, Daron & Shimer, Robert, 1999. "Holdups and Efficiency with Search Frictions," International Economic Review, Department of Economics, University of Pennsylvania and Osaka University Institute of Social and Economic Research Association, vol. 40(4), pages 827-49, November.
  28. Ricardo J. Caballero & Adam B. Jaffe, 1993. "How High are the Giants' Shoulders: An Empirical Assessment of Knowledge Spillovers and Creative Destruction in a Model of Economic Growth," NBER Chapters, in: NBER Macroeconomics Annual 1993, Volume 8, pages 15-86 National Bureau of Economic Research, Inc.
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