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Alternative equity markets and firm creation

Author

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  • Valérie Revest

    (University Lumière Lyon 2)

  • Alessandro Sapio

    (Parthenope University of Naples)

Abstract

Stock markets perform a creation function if the inflow of finance in the birth of new privately-held firms is stimulated by the promise of stock market liquidity at a later point in time. We test the creation function of the Alternative Investment Market (AIM), the junior segment of the London Stock Exchange, by regressing sectoral entry on capital raised at IPO on AIM and on the main market, venture capital investments, and controls for sectoral productivity and industry turbulence. Our panel includes UK manufacturing sectors between 2004 and 2012. We find that sectors raising more capital on AIM housed more entrants in the subsequent years. The number of venture capital deals is also a positive driver of entry; by contrast, main market IPO proceeds show a negative association with entry. Results hold after endogeneity tests (pseudo diff-in-diff and 2-stage residual inclusion estimators).

Suggested Citation

  • Valérie Revest & Alessandro Sapio, 2019. "Alternative equity markets and firm creation," Journal of Evolutionary Economics, Springer, vol. 29(3), pages 1083-1118, July.
    • Handle: RePEc:spr:joevec:v:29:y:2019:i:3:d:10.1007_s00191-019-00618-x
    DOI: 10.1007/s00191-019-00618-x
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    More about this item

    Keywords

    Entry; Firm creation; Stock exchange; Junior stock market;
    All these keywords.

    JEL classification:

    • E44 - Macroeconomics and Monetary Economics - - Money and Interest Rates - - - Financial Markets and the Macroeconomy
    • G23 - Financial Economics - - Financial Institutions and Services - - - Non-bank Financial Institutions; Financial Instruments; Institutional Investors
    • L26 - Industrial Organization - - Firm Objectives, Organization, and Behavior - - - Entrepreneurship
    • L60 - Industrial Organization - - Industry Studies: Manufacturing - - - General
    • M13 - Business Administration and Business Economics; Marketing; Accounting; Personnel Economics - - Business Administration - - - New Firms; Startups

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