Accounting, accountability and governance in junior stock markets

Junior (or second-tier) stock markets provide an alternative to listing on main markets, especially for innovative and growth companies and those with relatively low market capitalization. One of the most established such markets is the UK's Alternative Investment Market (AIM), with over 800 quoted companies. Entities quoted on junior markets often have less developed governance and accountability structures than those on main markets. For example, chair/CEO duality, where the same individual (often a corporate founder) takes on both roles, is a recurring feature of such entities, and board sizes and the number of independent directors are often smaller than full corporate governance codes would expect. AIM companies rarely comply with the full UK Corporate Governance Code. An important alternative governance mechanism is the requirement for a "nominated adviser" (NOMAD), which advises an AIM company on its activities and reports regularly to the London Stock Exchange. The NOMAD reflects the tradition of relying on "soft" mechanisms of regulation in the UK, and the system relies on cooperation and transparency on the part of corporate management, which is not always forthcoming.