59 Pages Posted: 16 Jan 2011 Last revised: 19 Aug 2016
Date Written: July 1, 2013
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
Suggested Citation: Suggested Citation
Gerakos, Joseph J. and Lang, Mark H. and Maffett, Mark G., Post-Listing Performance and Private Sector Regulation: The Experience of the AIM (July 1, 2013). Chicago Booth Research Paper 13-14 (2013).. Available at SSRN: https://ssrn.com/abstract=1740809 or http://dx.doi.org/10.2139/ssrn.1740809