2016/33 | LEM Working Paper Series | ||||||||||||||||
Gazelles and muppets in the City: Stock market listing, risk sharing, and firm growth quantiles |
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Cosimo Abbate and Alessandro Sapio |
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Keywords | |||||||||||||||||
Firm growth; Quantile regression; Stock market; Financialization
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Abstract | |||||||||||||||||
Financialization is persuading academics and policy-makers that the
growth of SMEs can be unleashed by promoting their quotation on stock
markets. Is that true? Answering this can give clues on the functions
that stock markets actually perform in the financialized world. The
market may allow collecting finance for productive investments, or
mainly provide firms with opportunities for value extraction. It may
work as a selection device or as a risk-sharing mechanism. In this
paper, we test hypotheses linking the shape of the firm growth rates
distribution to stock market functions, through quantile regressions.
We use a sample of UK manufacturing companies listed on AIM, a junior
segment of the London Stock Exchange, and comparably small and young
unlisted companies. We find that the operating revenues and total assets
of AIM-listed gazelles grow faster than for their unlisted peers,
after controlling for lagged values of size, age, and growth. Yet,
there is a loss reinforcing effect for companies listed on the
AIM. After controlling for endogeneity by estimating instrumental
variable quantile treatment effect (IVQTE), our findings dismiss the
existence of a treatment effect of public quotation and are consistent
with the stock market attracting relatively risky companies.
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