1,721,302 research outputs found
Economies of Scope and IPO Activity in Europe
No full textInitial public offering (IPO) activity in Europe has recently come to a near-halt and, similarly to the US, this decline has been more pronounced among small firm IPOs. Three alternative explanations have been proposed: the economies of scope hypothesis states that getting big fast has become more important, resulting in small firms being acquired; the regulatory overreach hypothesis, which states that small firms are remaining private due to an increase in the regulatory costs borne by publicly traded firms; and the market conditions hypothesis, which states that poor stock market levels have resulted in low IPO volume. Although Europe is characterized by more fragmented regulation and by the existence of second markets with lower compliance costs, we argue that the decline in the number of IPOs is partly attributable to the economies of scope explanation. The Panic of 2008 and the Eurozone crisis of 2011 have also temporarily depressed IPO volume, consistent with the market conditions hypothesis. We present evidence of an increased difficulty for small firms to remain profitable, their underperformance, and their higher propensity to be acquired soon after the IPO, relative to large firms. We document that these patterns persist even among second market IPOs, where the regulatory overreach hypothesis does not apply. Controlling for the impact of market valuations, we investigate IPO activity in a time-series setting and unveil a downward trend in European IPOs over time
Introduction [to Globalization and Public Policy. A European Perspective]
No full textThis volume analyzes and assess seven key policy issues facing the European Union and the United States and suggest various policy solutions in order to make the U.S. and the EU more competitive in these key sectors. The
term globalization has exploded in the literature since the fall of the Berlin Wall in 1989. The world is growing ever-more interconnected and because of world’s greater connectivity, there comes a slew of more problems, but also a greater variety of available policy solutions as countries can look to one another. This chapter addresses the effect that globalization has had, particularly on Europe and its partnership with the United States. Furthermore, the chapter introduces the seven topics to be discussed throughout the volume: income distribution, gender pay gap, crime and security, unemployment, health care, demographics, and environmental regulation
Equity retention and social network theory in equity crowdfunding
Full text linkThis paper makes two contributions to research on the new entrepreneurial finance context of equity crowdfunding. First, we compare its regulation around the world and discuss how this impacts the development of markets. Second, we investigate the signaling role played toward external investors by equity retention and social capital. Using a sample of 271 projects listed on the UK platforms Crowdcube and Seedrs in the period 2011–2014, we find that campaigns launched by entrepreneurs (1) who sold smaller fraction of their companies at listing and (2) had more social capital had higher probabilities of success. Our results combine findings in classical entrepreneurial finance settings, like venture capital and IPOs, with evidence from other, non-equity crowdfunding markets
Expanding corporate finance perspectives to equity crowdfunding
No full textIn equity crowdfunding, firms raise capital online from a large pool of heterogeneous investors, thereby providing primary market opportunities similar to traditional public markets, such as initial public offerings. The development of secondary markets is instead still limited, making the post-offering perspectives of both crowdfunding investors and firms closer to private equity deals. We believe that equity crowdfunding markets provide an interesting setting where to test existing corporate finance and financial economics theories, as well as to develop new theoretical insights. Relatedly, our understanding of crowdfunding mechanisms can largely benefit from increased attention from finance scholars. This paper and special issue are an attempt in this direction
Information cascades among investors in equity crowdfunding
Full text linkFinance studies on information cascades, usually in an initial public offering setting, typically differentiate between institutional and retail investors, as this is the only information available to potential backers. Information available through equity crowdfunding platforms includes details on individual investors as they may disclose information about themselves by linking their profile to social networks or websites. Using a sample of 132 equity offerings on Crowdcube in 2014, we show that information cascades among individual investors play a crucial role in crowdfunding campaigns. Investors with a public profile increase the appeal of the offer among early investors, who in turn attract late investors
Does success bring success? The post-offering lives of equity-crowdfunded firms
No full textUsing an augmented dataset with combined information from Crowdcube, Crunchbase, and Companies House, we study the population of 212 successfully funded initial equity offerings on the UK's largest crowdfunding platform Crowdcube from inception (2011) to 2015. We find that 18% of these firms failed, while 35% pursued one or more seasoned equity offerings in the form of either private equity injection (9%) or follow-on crowdfunding offering (25%), while three firms were acquired. Among the determinants of the post-campaign scenarios, we find that the degree of investor participation in the initial offering plays a relevant role. In particular, firms with more dispersed ownership are less likely to issue further equity, while those that reach the target capital more quickly are more likely to launch a follow-on offering. Further, none of the companies initially backed by qualified investors subsequently failed
Inclusive digital finance: the industry of equity crowdfunding
Full text linkNowadays equity crowdfunding plays an important role in the entrepreneurial finance markets. To better understand the functioning of the industry, it is important to consider the entire equity crowdfunding process and all the actors involved. Equity crowdfunding platforms match indeed the demand of capital from entrepreneurial ventures with the supply of capital by investors. This manuscript is a first step in this direction, by (1) comparing equity crowdfunding with traditional sources of entrepreneurial finance; (2) discussing the potential and the perils of equity crowdfunding for inclusivity and democratization; (3) highlighting the role of visual information in digital finance; and (4) providing first insights on the industrial dynamics in equity crowdfunding. The paper gives researchers and practitioners orientation about recent developments in equity crowdfunding literature and provides relevant research directions
Stock-financed M&As of newly listed firms
No full textNewly listed firms are increasingly active in mergers and acquisitions (M&As). The “stock as currency” motivation explains why firms engage in stock-financed acquisitions after their Initial Public Offering (IPO). We extend its implications by focusing on the role played by stock liquidity, which entails potential benefits not only for prospective acquirers, but also for targets. We find that 16.3 % of the population of 3433 firms going public in Europe from 1995 to 2009 become acquirers within 3 years of the IPO, while 16.8 % are targeted. Firms with more liquid stocks are more likely to acquire and complete a larger number of stock-financed acquisitions. More liquid firms are also more likely to be acquired, and at higher valuations. Our firm-level findings, supported by time-series regressions, imply that firms should time their IPO based on liquidity considerations to facilitate subsequent M&A activity as either acquirer or target
IPOs and entrepreneurial firms
Full text linkThe listing on a stock exchange is a paramount milestone in the life cycle of an enterprise. By taking their company public on a stock market through an Initial Public Offering (IPO), entrepreneurs may target several benefits (e.g., raising money, facilitating acquisitions, offering valuable stock ownership plans to employees) but their firms will bear new costs and requirements. In this work we review the academic literature on IPOs of entrepreneurial firms, focusing on five main topics: (i) the going public decision, (ii) pricing and valuation, (iii) the role of intermediaries and underwriters in the listing process, (iv) the performance of IPO-firms in the short and long run, and (v) market cycles in the IPO industry
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