Shima Amini

The equity funding of smaller growing companies and regional stock exchanges

The credit crisis has led to tightened bank so lending to smaller firms it is no surprise that the debate concerning the re-introduction of regional stock exchanges into the UK has received fresh impetus. This article analyses all UK based Initial Public Offerings (IPOs) on the Alternative Investment Market (AIM) to contribute to this debate and the small firm funding literature. The results indicate that London has dominated IPO activity on the AIM; this reflects the dynamism of this local economy rather than differential funding across the regions. A more fruitful approach than developing regional stock exchanges might be for the current stock exchange to develop stronger links with small business advice and networking organizations working with these existing mechanism/structures to enhance the supply of equity and debt finance to suitable firms much earlier in their life-cycles.

The failure of small British Initial Public Offerings on the UK Alternative Investment Market: A research note on spatial and industry effects

This research note investigates the failure probability of British Initial Public Offerings (IPOs) on the Alternative Investment Market (AIM) in terms of spatial proximity to London and operating within the financial services sector. The results suggest that financial services firms in proximity to London experience a higher failure rate on AIM. It is suggested that part of the higher failure rate observed on AIM, compared to the failure rate of small IPOs elsewhere, can be explained by the London dominance of AIM, which favours those financial sector businesses that manage to achieve an IPO.

The amount of raised capital by small IPOs

Purpose – Given the long lived literature on the small firm funding gap and the contemporary evidence on the easier access to equity finance of the London proximate firms, this study aims to examine the relevance of spatial proximity to London in explaining the amount of monies raised by small British firms at Initial Public Offerings (IPOs) on the UK Alternative Investment Market (AIM).Design/methodology/approach – A cross sectional regression analysis is conducted to see whether proximity to London affects the amount of monies raised by small British firms at IPOs.Findings – The results suggest that proximity to London has a positive effect on the amount of monies raised through IPO and, therefore, there exists a London bias even for those small firms which manage to overcome the equity gap problem and achieve a London listing.Originality/value – The paper contributes to both the economic geography and the small firm regional disparity literature by documenting for the first time that geographic locatio...

Accessing capital markets: Aristocrats and new share issues in the British bicycle boom of the 1890s

Abstract The article reconsiders the mid-1890s boom in which a large number of firms in the bicycle, pneumatic tyre and related industries were floated. It investigates why so many of these issues featured aristocratic directors in their prospectuses and finds that they represented social connections that were a necessary condition for regional industrial firms to gain a London listing. The case shows that the role and value of these directors was to access capital markets and financial resources, as opposed to a temporary aberration designed to inflate share prices and mislead investors.

Large Price Changes and Pervasive Non-Linearity in Financial Markets: Implications and Interpretations

We show that expected returns on US stocks and all major stock world market indices are non-linearly dependent on previous returns. The expected sign of returns tends to reverse after large price movements and trends tend to continue after small movements. This property can be captured by a simple polynomial model. Incorrectly fitting a simple linear model to the data leads to substantial bias in coefficient estimates and the polynomial model can be used to eliminate trends in the data. In addition, well known technical trading rules may be substantially driven by the non-linear behavior observed.

Nominal Price Level and Noise Trading

Contributing to the debate on the nominal price puzzle, we show that higher stock price level is associated with lower noise trading level which confirms Black’s (1986) conjectures that noise traders prefer low-priced stocks to high-priced stocks. The result is robust after controlling for institutional ownership, analyst coverage and company size. Given that noise trading level affects liquidity and cost of capital, this finding demonstrates the economic relevance of price level decision.

Short Term Predictability, Volume and Microstructure Effects in Stock Prices

This paper documents strong evidence for short term predictability of individual stocks in the London Stock Exchange. We find empirical evidence for price reversals after large price changes and price continuation after small price changes. Our results indicate that large companies seem to react more efficiently to previous price changes and that the effect has been robust over time. The results are robust to non-normality of returns and are not explained by market microstructure effects like nonsynchronous trading or bid-ask bounce. We further investigate whether the effect can be explained by rational asset-pricing theory or behavioral theories. In these investigations we employ volume as an additional explanatory variable. Finally when considering whether the predictability has any implications for market efficiency we show that the size of bid-ask spreads are highly related to previous price movements.