Europe's Second Markets for Small Companies

49 Pages Posted: 9 Nov 2011 Last revised: 5 Jan 2012

See all articles by Silvio Vismara

Silvio Vismara

University of Bergamo

Stefano Paleari

University of Bergamo - SIGE Sezione di Ingegneria Gestionale

Jay R. Ritter

University of Florida - Department of Finance, Insurance and Real Estate

Multiple version iconThere are 2 versions of this paper

Date Written: January 4, 2012

Abstract

European stock exchanges have repeatedly opened second markets to list small companies. We explain the motivation for the creation of these second markets, and the reasons why many of them have failed. We find that the average long-run performance of initial public offerings (IPOs) on second markets is dramatically worse than for main market IPOs. However, the second markets have provided firms with the opportunity to raise funds at the IPO and in follow-on offerings. The relative success of London’s AIM, which is an exchange-regulated market with minimal regulations, has led other European stock exchanges to establish similar non-EU regulated second markets. Most of the IPOs on these exchange-regulated markets are offered exclusively to institutional investors, and are equivalent to private placements. These IPOs, which frequently raise only a few million euros, rarely develop liquid trading.

Keywords: stock exchanges, second markets, financial regulation, IPOs, AIM, London Stock Exchange, Neuer Markt

JEL Classification: G15, G30

Suggested Citation

Vismara, Silvio and Paleari, Stefano and Ritter, Jay R., Europe's Second Markets for Small Companies (January 4, 2012). Available at SSRN: https://ssrn.com/abstract=1957140 or http://dx.doi.org/10.2139/ssrn.1957140

Silvio Vismara (Contact Author)

University of Bergamo ( email )

Via Marconi 5
24044 Dalmine, Bergamo
Italy
00390352052352 (Phone)
0039035562779 (Fax)

Stefano Paleari

University of Bergamo - SIGE Sezione di Ingegneria Gestionale ( email )

Via Marconi 5
24044 Dalmine, Bergamo
Italy
+39 03 520 52340 (Phone)
+39 03 556 2779 (Fax)

Jay R. Ritter

University of Florida - Department of Finance, Insurance and Real Estate ( email )

P.O. Box 117168
Gainesville, FL 32611
United States
(352) 846-2837 (Phone)
(352) 392-0301 (Fax)

HOME PAGE: http://bear.cba.ufl.edu/ritter

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