Does Securities Regulation Constrain Small Business Finance? An Empirical Analysis
25 Pages Posted: 19 May 2008 Last revised: 12 Feb 2010
Date Written: October 5, 2008
Abstract
In November 2001, the Canadian province of Ontario amended the private placement regulations considerably to facilitate access to equity financing by small and medium sized enterprises. To determine the extent to which securities regulation is an effective constraint on financing of growth corporations, we analyze issue activity before and after this change took effect. We note an increase in the number of issues, but only a slight increase in the total amounts raised on the private market following the reform. The average size of the issues has thus decreased. Some of the observed changes can be traced to concurrent events, namely the burst of the technology bubble and the strong increase in the prices of natural resources, which represent a major sector in Canada. When we control for various factors that influence issue activity, we observe a statistically significant effect only on the number of issues by closed corporations, which seems to originate from the non-resource companies. These results do not rule out the conclusion that the reform eased the issue of small amounts of money by private companies. However, our results do not confirm the argument that securities regulation is a major constraint to small business finance.
Keywords: securities regulation, private placement, small business
JEL Classification: K22, G38, G32
Suggested Citation: Suggested Citation
Do you have negative results from your research you’d like to share?
Recommended Papers
-
Financing Under Extreme Risk: Contract Terms and Returns to Private Investments in Public Equity
By Susan Chaplinsky and David Haushalter
-
Does Investor Identity Matter in Equity Issues? Evidence from Private Placements
By Srinivasan Krishnamurthy, Paul A. Spindt, ...
-
By Na Dai
-
The Choice of Equity Selling Mechanisms: PIPES versus SEOS
By Hsuan‐chi Chen, Na Dai, ...
-
The Quality and Price of Investment Banks' Service: Evidence from the PIPE Market
-
By Kimberly C. Gleason, Ravi Jain, ...
-
By Karen H. Wruck and Yilin Wu
-
By Ioannis V. Floros and Kuldeep Shastri