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BItNotes n°13

BItNotes n°13
"The effects of listing. Evidence from the Italian mid & small caps"
A. Franzosi, E. Pellizzoni - June 2005


This paper analyses the decision to go public of 127 non financial mid & small cap companies on the Italian equity market during the period 1995-2002. Differences in pre and post Ipo financial indicators are calculated by econometric panel models. Companies' perception of the changes in the firm's organisation are investigated by a survey among their owners and managers. Access to the equity market seems to be a relevant event during the firm's life cycle, with effects that overcome the straightforward changes in financial data. Ipo helped to sustain the positive growth registered before the listing, considerably increasing investments in fixed assets and fuelling M&A activity. Flotation brought an immediate but temporary reduction in leverage and, as a medium term effect, it improved bargaining borrowing power. It was not a starting point for a systematic use of the equity market. As indicated by literature on international markets, Italian listed companies showed a decrease in operating performances after the Ipo. Listing required relevant changes in companies' organisation systems, mainly to manage relations with new external stakeholders. Listed companies introduced or changed their communication systems. They changed their corporate governance rules to ensure a higher degree of minority shareholders protection. They improved their planning and control systems and human resources management procedures, with an increase in employees' competences. Companies very often rationalised their group structure to maximise the market value. Italian listed companies believe that benefits coming from these changes, in terms of better capability to manage relations outside the firm and improvements in management efficiency, were higher than implementation costs. They said that these changes created economic value, suggesting they are appropriate for any company willing to grow.

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Last update:  December 23 2005 - 10:20
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