Latin American Capital Markets

ACCESS TO FINANCING FOR SMALL AND MEDIUM ENTERPRISES 403tive to a traditional IPO.The issuer performs the underwriting structuring, filing, andselling of its offer without the underwriter and selling syndicate that is used in an IPO.DPOs are gaining popularity on the Internet, especially in the United States, due tothe rise of e-commerce and online investors.Small and Medium Enterprise MarketsDefinition and ScopeThe jury is still out on the accomplishments attained by stock exchanges dedicated toserve SMEs and the extent to which they have been successful in bringing SMEs to thecapital market. On one side, there is support for the notion that, especially in emergingeconomies, stock exchanges are particularly relevant in helping medium-size indigenousfirms gain access to finance and supporting local market development. On theother side, there are doubts that suggest that the very nature of SMEs makes them unsuitableto access capital markets. A related implication for the first perspective, whichis being borne out by the evidence, is that large firms find international listing, such asAmerican Depository Receipts and Global Depository Receipts, the best form of accessingcapital markets. This section reviews some of the evidence and examples ofstock exchanges that have been dedicated to SMEs and their different levels of success.An SME stock market, established as either a separate or integrated market,is an exchange facility specially designed and operated for the listing and trading ofthe securities of small and mid-size companies. According to an International Federationof Stock Exchanges (FIBV) study on small and medium-size business markets,such a market may have multiple objectives (Schulman 1999):• Provide a nursing ground for small and medium companies and allow themto expand until they are large enough for the main market• Stimulate the regional economy by creating new paths for capital intermediationand motivating individuals and institutions to invest in the local economyand increase their interest in those markets• Transform the local economy by giving local businesses the stimulus for growthand the larger perspective that comes from managing a public company• Open the economy enhancing the efficiency of capital transfers within theprivate business sector and causing local businesses and investors to thinkand behave more actively and globallyCopyright © by the Inter-American Development Bank. All rights reserved.For more information visit our website: www.iadb.org/pub