Listing Switch on the Warsaw Stock Exchange: Raising Capital and Financial Leverage

Abstract

Theoretical background: Much attention has been paid in the finance literature to the issue of raising capital through the capital market. However, there is still not much focus on the analysis of this issue in the context of the transition of companies from the lower to the higher end of the stock market, e.g. the switch from the alternative market to the regulated market. In the Polish literature, the analysis of the going public in two stages is relatively unexplored. Purpose of the article: The purpose of the study is the identification of the impact of switching listing venue from an alternative market to the regulated one on the possibility of raising capital and the financial leverage. The research presents the results of the analysis of raising capital by the companies firstly entering the NewConnect and then transferring to the main market of the Warsaw Stock Exchange. Research methods: The analyses used the following metrics: debt-to-asset ratio and debt-to-equity ratio calculated over a longer time horizon covering the observation window beginning 3 years before the transfer and ending 3 years after the transfer (in total, 7 years). To examine if the ratios differ significantly between before and after the change, the significance analysis was based on the parametric tests: t-student’s paired test for means and the Wilcoxon matched-pairs signed-rank test for medians. Main findings: Listing switch on the Warsaw Stock Exchange and entering a regulated market has triggered the growth of companies but did not lead in equity being raised by companies during the debut on the regulated market. Companies did not reduce financial leverage, debt-to-asset-ratios and debt-to-equity ratios increased in the years following the change of listing venue from the alternative market to the regulated market.