Europe's 'New' Stock Markets

47 Pages Posted: 4 Oct 2002

See all articles by Laura Bottazzi

Laura Bottazzi

University of Bologna - Department of Economics; Bocconi University - IGIER - Innocenzo Gasparini Institute for Economic Research; University of Bologna - Rimini Center for Economic Analysis (RCEA)

Marco Da Rin

Tilburg University, Department of Finance; Tilburg Law and Economics Center (TILEC); European Corporate Governance Institute (ECGI)

Multiple version iconThere are 2 versions of this paper

Date Written: July 2002

Abstract

The creation of Europe's 'new' stock markets represents a major experiment in market design with important implications for the ability to support innovative, fast-growing companies. We evaluate the success of these markets based on a large number of measures of firm performance and strategy which extend to several pre- and post-listing years. Our hand collected databasemis obtained from the listing prospectuses and annual reports of 538 companies which listed on the Neuer Markt, Nouveau Marche, and Nuovo Mercato from 1996 through 2001. Three findings stand out. First, these companies experience a dramatic change after the IPO, rebalancing their capital structure, increasing their debt and investment, accelerating growth, and becoming less profitable. These changes are consistent with the existence of credit constraints, and are greater than for companies listing on the 'main' markets. Second, we document a considerable variation in post-IPO growth rates and corporate strategy, across both companies and markets. This variation is largely due to the ability to raise equity capital at IPO. Third, the adoption of US GAAP accounting standards substantially increases firms' ability to raise capital. While Europe's 'new' markets have provided high-growth companies with an unprecedented opportunity to finance their growth, the adoption (and enforcement) of tighter standards of disclosure is then crucial for their success.

JEL Classification: G10, G15, G30

Suggested Citation

Bottazzi, Laura and Da Rin, Marco, Europe's 'New' Stock Markets (July 2002). EFA 2003 Annual Conference Paper; IGIER Working Paper No. 218. Available at SSRN: https://ssrn.com/abstract=319260 or http://dx.doi.org/10.2139/ssrn.319260

Laura Bottazzi (Contact Author)

University of Bologna - Department of Economics

Strada Maggiore 45
Bologna, 40125
Italy

Bocconi University - IGIER - Innocenzo Gasparini Institute for Economic Research ( email )

Via Roentgen 1
Milan, 20136
Italy
+39 02 5836 3326 (Phone)
+39 02 5836 3302 (Fax)

HOME PAGE: http://www.igier.uni-bocconi.it/bottazzi

University of Bologna - Rimini Center for Economic Analysis (RCEA) ( email )

Via Patara, 3
Rimini (RN), RN 47900
Italy

Marco Da Rin

Tilburg University, Department of Finance ( email )

P.O. Box 90153
Tilburg, 5000 LE
Netherlands

Tilburg Law and Economics Center (TILEC)

Warandelaan 2
Tilburg, 5000 LE
Netherlands

European Corporate Governance Institute (ECGI)

c/o ECARES ULB CP 114
B-1050 Brussels
Belgium

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