The Survival and Success of Canadian Penny Stock IPOs

31 Pages Posted: 12 Dec 2007 Last revised: 13 Apr 2012

See all articles by Cécile Carpentier

Cécile Carpentier

Laval University; Center for Interuniversity Research and Analysis on Organization (CIRANO); University of Lille II - European Center for Corporate Control Studies

Jean-Marc Suret

Laval University; Center for Interuniversity Research and Analysis on Organization (CIRANO); European Center for Corporate Control Studies

Multiple version iconThere are 2 versions of this paper

Date Written: July 21, 2008

Abstract

This paper provides the first large-scale analysis of the economic effect of allowing small emerging firms to access the stock market. We analyze the survival and success of Canadian newly listed companies based on an original sample of 2,373 issues from 1986 to 2003, composed essentially (86%) of penny stock IPOs. The proportion of issuers without revenues (positive earnings) is 45% (71%) and the median shareholders' equity before the IPO is CAN$310,000. We show that the failure rate of these microcap IPOs is surprisingly lower than the one observed in the U.S. for larger IPOs. We evidence that the differences between the survival rates are linked to the class of minimum listing requirements in which the company is situated at the IPO, but we find few effects of these requirements on success, estimated by the graduation to a senior exchange. Several variables mitigate the role of listing requirements.

Keywords: small business finance, initial public offering, survival, success, minimum listing requirements

JEL Classification: G38, G32, K22

Suggested Citation

Carpentier, Cécile and Suret, Jean-Marc, The Survival and Success of Canadian Penny Stock IPOs (July 21, 2008). Small Business Economics, 36 (1) 2011: 101-121. Available at SSRN: https://ssrn.com/abstract=1070855

Cécile Carpentier (Contact Author)

Laval University ( email )

Pavilion Palasis Prince
Quebec, Quebec G1V 0A6
Canada

Center for Interuniversity Research and Analysis on Organization (CIRANO) ( email )

2020 rue University, 25th floor
Montreal, Quebec H3C 3J7
Canada

University of Lille II - European Center for Corporate Control Studies ( email )

2 rue de Mulhouse
BP381
Lille, 59800
France

Jean-Marc Suret

Laval University ( email )

Accounting School
Quebec, P.Q. G1K 7P4
Canada
418-656-7134 (Phone)
418-656-7746 (Fax)

Center for Interuniversity Research and Analysis on Organization (CIRANO) ( email )

1130 rue Sherbrooke Ouest
Bureau 1400
Montreal, Quebec H3A 2M8
Canada

European Center for Corporate Control Studies ( email )

2 rue de Mulhouse
BP381
Lille, 59800
France

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