Response of firms to listing: Evidence from SME exchanges

Public equity markets have increasingly become accessible to small and medium firms with the introduction of dedicated exchange that lower listing criteria to allow such firms to list their equity. We exploit the introduction of such a dedicated exchange in India to ask how listing impacts the financial constraints and growth prospects of small and medium firms. The causal impact is assessed using a difference-in-differences estimation based on a sample of firms that listed on these exchanges over a three year period, where we also observe matched firms that are not listed. We find that listing improves the asset size and capital structure of listed firms relative to firms that do not list. But we find no evidence that these firms are subsequently able to access higher debt finance from formal institutions, nor evidence of improvement in the performance of these firms, after listing.