Serving SMEs via the stock exchange

historical lessons from the Lisbon stock exchange

Research output: Contribution to journalArticle

1 Citation (Scopus)

Abstract

The development of large companies in the western world — many being huge multinational corporations — and the sheer size of their financial needs has given an added importance to tradability, a fact that can clearly be gauged by the recently discovered “high frequency trading” (HFT) operations which are only possible with large issues. Also contributing to the importance of tradability is the recent demutualization of most exchanges during the 1990s, which turned them into for-profit organizations. In fact, large issues of shares or bonds allow economies of scale, and generate experience in listing practices and trading operations, thereby enhancing the profitability of those commercially oriented stock exchanges. Thus, small and medium enterprises (SMEs) are now much less attractive to these organizations, as compared to large enterprises (LEs), due to their inherent lack of liquidity and to the economies of scale. We discuss the barriers before SMEs, which require special accommodations to be able to raise stable funds for their development.

Original languageEnglish
Pages (from-to)851-871
Number of pages21
JournalJournal of Economic Issues
Volume50
Issue number3
DOIs
Publication statusPublished - 2 Jul 2016

Fingerprint

Stock exchange
Economies of scale
Small and medium-sized enterprises
Large enterprises
Accommodation
Demutualization
High-frequency trading
Large companies
Multinational corporations
Liquidity
Profitability

Keywords

  • financing firms
  • Lisbon Stock Exchange
  • SMEs
  • stock exchanges

Cite this

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title = "Serving SMEs via the stock exchange: historical lessons from the Lisbon stock exchange",
abstract = "The development of large companies in the western world — many being huge multinational corporations — and the sheer size of their financial needs has given an added importance to tradability, a fact that can clearly be gauged by the recently discovered “high frequency trading” (HFT) operations which are only possible with large issues. Also contributing to the importance of tradability is the recent demutualization of most exchanges during the 1990s, which turned them into for-profit organizations. In fact, large issues of shares or bonds allow economies of scale, and generate experience in listing practices and trading operations, thereby enhancing the profitability of those commercially oriented stock exchanges. Thus, small and medium enterprises (SMEs) are now much less attractive to these organizations, as compared to large enterprises (LEs), due to their inherent lack of liquidity and to the economies of scale. We discuss the barriers before SMEs, which require special accommodations to be able to raise stable funds for their development.",
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