Post-Listing Performance and Private Sector Regulation: The Experience of the AIM
Joseph J. Gerakos
Tuck School of Business at Dartmouth College
Mark H. Lang
University of North Carolina at Chapel Hill
Mark G. Maffett
University of Chicago - Booth School of Business
February 1, 2013
Chicago Booth Research Paper No. 13-14
We investigate the post-listing experience of companies raising capital on the London Stock Exchange’s Alternative Investment Market (AIM). The AIM is unique in that it is privately regulated and relies on Nominated Advisors (Nomads) who compete to bring new listings and provide ongoing regulatory oversight. We find that AIM firms significantly underperform firms on regulated exchanges in terms of post-listing returns and failure rates. The underperformance is similar to that of firms listing on the OTC Bulletin Board prior to SEC regulation. Underperformance is associated with abnormally high pre-listing accruals and post-listing reversals, and is more pronounced for firms raising capital. The choice of a “high quality” auditor or Nomad partially mitigates underperformance, suggesting that AIM firms have a limited ability to bond through commitments to more stringent oversight. Negative returns are particularly pronounced for firms with high proportions of retail investors.
Keywords: Securities Regulation, Post-IPO Performance, International Accounting
JEL Classification: F30, G18, G32, G38
Date posted: January 16, 2011 ; Last revised: July 13, 2016
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