The Creation and Evolution of Entrepreneurial Public Markets

Shai Bernstein, Abhishek Dev and Josh Lerner

No 25414, NBER Working Papers from National Bureau of Economic Research, Inc

Abstract: This paper explores the creation and evolution of new stock exchanges around the world geared towards entrepreneurial companies, known as second-tier exchanges. Using hand-collected novel data, we document the proliferation of these new stock exchanges that were created in a large number of countries, attracted a significant volume of global IPOs, were introduced fairly cyclically, and had lower listing requirements when compared to first-tier stock exchanges. We find that increases in demand for entrepreneurial capital—as proxied for by patenting, IPOs, and stock market valuations—led to a higher likelihood of the introduction of second-tier exchanges. We find no evidence that new second-tier exchanges diverted the existing flow of IPOs from established stock exchanges. Shareholder protection strongly predicted exchange success, even in countries with high levels of venture capital activity, patenting, and financial market development. Second-tier exchanges in countries with better shareholder protection allowed younger, less profitable, but faster-growing companies to raise more capital. These results highlight the importance of institutions in enabling the provision of entrepreneurial capital to young companies.

JEL-codes: G24 G38 L26 (search for similar items in EconPapers)
Date: 2018-12
New Economics Papers: this item is included in nep-cfn and nep-ent
Note: CF PR
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (4)

Published as Shai Bernstein & Abhishek Dev & Josh Lerner, 2019. "The Creation and Evolution of Entrepreneurial Public Markets," Journal of Financial Economics, .

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Related works:
Journal Article: The creation and evolution of entrepreneurial public markets (2020)
Working Paper: The Creation and Evolution of Entrepreneurial Public Markets (2018)
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