Initial Listing Standards, Accounting-Based Metrics and Firm Delistings

Seppänen, Harri J.

doi:10.2139/ssrn.1589294

Cited by 1 publication

(2 citation statements)

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“…Junior 2 This market offered the opportunity for ventures to list with as little as $440,000 of equity capital, approximately $850,000 in annual sales, or approximately $250,000 of net profit. stock exchanges often do not even generate sufficient cash to sustain themselves (Seppanen, 2010). Even the vaunted U.S. NASDAQ's experiment with lowered listing requirements, for example, resulted in the listing of poorly performing firms compared to companies that listed on the New York Stock Exchange (Klein & Mohanram, 2004;Pagano & Panetta, 1998).…”

Section: The Empirical Setting: Junior Stock Exchanges As An Institmentioning

confidence: 99%

“…This results is higher failure rates of the listed firms and the frequent failure of the junior exchange itself when few firms even attempt to list (Giudici & Roosenboom, ). Junior stock exchanges often do not even generate sufficient cash to sustain themselves (Seppanen, ). Even the vaunted U.S. NASDAQ's experiment with lowered listing requirements, for example, resulted in the listing of poorly performing firms compared to companies that listed on the New York Stock Exchange (Klein & Mohanram, ; Pagano & Panetta, ).…”

Section: Introductionmentioning

confidence: 99%

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The dark side of institutional intermediaries: Junior stock exchanges and entrepreneurship

Eberhart

Eesley

2018

Strategic Management Journal

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Research Summary: Our study shows how institutional intermediaries established to foster the creation of new firms might hinder new firm growth instead. We show that intermediaries can reduce new firm growth rates due to institutional conflict. To analyze this idea, we examine the setting of junior stock exchanges, which are commonly formed to facilitate entrepreneurial growth. The introduction of these exchanges focused investment into new technology firms, reduced investment in other sectors, and led to diminishing new firm growth. Our findings demonstrate how institutional conflict causes unintended effects and reveals the complexity of influencing entrepreneurship with institutional intermediaries. Managerial Summary: Investors and entrepreneurs face uncertainty when deciding what firms to start and fund. We show that an intermediation effort to make entry easier for entrepreneurs increases the uncertainty that entrepreneurs and investors face. For investors, the enthusiasm for technology firms engendered by the new exchange can motivate investment in marginal firms to maintain as desired deal flow. However, lower firm growth and less liquidity in the future is likely. For entrepreneurs, our results indicate that it is more challenging to manage technology firm growth as well as there is potential opportunity to investigate other industries. Finally, for policymakers and supporters of the new exchanges, our results imply that investment flows are altered as intended, but unless listing standards remain high, the virtuous cycle of † The authors dedicate this work to the memory of Dr. William Miller-a mentor and friend to both of us whom we deeply miss. We especially thank Khonika Gope for her excellent research assistance. We also acknowledge the generous help of

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Section: The Empirical Setting: Junior Stock Exchanges As An Institmentioning

confidence: 99%

Section: Introductionmentioning

confidence: 99%