Does Securities Regulation Constrain Small Business Finance? An Empirical Analysis

25 Pages Posted: 19 May 2008 Last revised: 12 Feb 2010

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-Francois L'Her

Canada Pension Plan Investment Board; Caisse de Depot et Placement du Quebec (CDPQ)

Jean-Marc Suret

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

Date Written: October 5, 2008

Abstract

In November 2001, the Canadian province of Ontario amended the private placement regulations considerably to facilitate access to equity financing by small and medium sized enterprises. To determine the extent to which securities regulation is an effective constraint on financing of growth corporations, we analyze issue activity before and after this change took effect. We note an increase in the number of issues, but only a slight increase in the total amounts raised on the private market following the reform. The average size of the issues has thus decreased. Some of the observed changes can be traced to concurrent events, namely the burst of the technology bubble and the strong increase in the prices of natural resources, which represent a major sector in Canada. When we control for various factors that influence issue activity, we observe a statistically significant effect only on the number of issues by closed corporations, which seems to originate from the non-resource companies. These results do not rule out the conclusion that the reform eased the issue of small amounts of money by private companies. However, our results do not confirm the argument that securities regulation is a major constraint to small business finance.

Keywords: securities regulation, private placement, small business

JEL Classification: K22, G38, G32

Suggested Citation

Carpentier, Cécile and L'Her, Jean-Francois and Suret, Jean-Marc, Does Securities Regulation Constrain Small Business Finance? An Empirical Analysis (October 5, 2008). Small Business Economics, Vol. 31, No. 4, pp. 363-377. Available at SSRN: https://ssrn.com/abstract=1131792

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-Francois L'Her

Canada Pension Plan Investment Board ( email )

One Queen Street East
Suite 2600
Toronto, Ontario M5C 2W5
Canada

Caisse de Depot et Placement du Quebec (CDPQ) ( email )

1000, place Jean-Paul-Riopelle
Montreal, Quebec H2Z 2B3
Canada

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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