Latin American Capital Markets

ACCESS TO FINANCING FOR SMALL AND MEDIUM ENTERPRISES 407• Pre- and post-listing educational programs for issuers• Research promotion on SMEs• Creation of indices• Knowledge distribution, mainly for potential investors.New Markets in EuropeAfter the success of NASDAQ in attracting young, innovative, and high-growth companies,many European exchanges decided to establish similar markets. By the end of2001, there were 20 new markets aimed at young, high-growth, and mostly technologyfocusedenterprises.These European markets have not been as successful as NASDAQbecause many of them have failed to attract an appropriate number of issuers, and othershave suffered from regulation, risk, or liquidity issues.The growth of all markets hasslowed down, which most likely will affect the smaller markets that are widely consideredmore risky. In 2000, all markets suffered from the decline of technology stocks. In2001, the decline halted and a slow recovery began, followed by uncertainties linkedwith the terrorist attacks of September I I. Table 12-6 gives an overview of the newmarkets in Europe as of the end of 2001 (Grant Thornton 2002).EvaluationMany of the exchanges established their SME markets for competitive reasons, suchas marketing purposes, and not all of them operate under the explicit goal of profitability.SME markets are often viewed simultaneously as incubators for the main marketand as legitimate and important capital markets in their own right.In 2002, only 3 percent of the total SME sector and only 10 percent ofmedium-size companies in Europe considered flotation as an option in the foreseeablefuture. In fact, half of the SMEs indicated that they were not going to seek achange of ownership in the foreseeable future. Most SMEs seek a change of ownershipin a period of three-to-five years and show two preferences: trade sale and passingthe business to the next generation. However for medium-size businesses, athereare two options that are ranked higher relative to the overall SME sector: private equityinvestors are 22 percent compared with 15 percent, and flotation is 10 percentcompared with 3 percent (Grant Thornton 2002).It is somewhat difficult to prove the success of small and medium enterprisemarkets because only limited data are available and little evaluation has been madeso far Schulman (1999, p. 12) claims that the "responses to the FIBV's [Small andCopyright © by the Inter-American Development Bank. All rights reserved.For more information visit our website: www.iadb.org/pub