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Graduation of initial public offering firms from junior stock markets: evidence from the Tokyo Stock Exchange

Small business economics, 2023-02, Vol.60 (2), p.813-841 [Peer Reviewed Journal]

The Author(s) 2022 ;The Author(s) 2022. This work is published under http://creativecommons.org/licenses/by/4.0/ (the “License”). Notwithstanding the ProQuest Terms and Conditions, you may use this content in accordance with the terms of the License. ;ISSN: 0921-898X ;EISSN: 1573-0913 ;DOI: 10.1007/s11187-022-00615-8

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  • Title:
    Graduation of initial public offering firms from junior stock markets: evidence from the Tokyo Stock Exchange
  • Author: Honjo, Yuji ; Kurihara, Koki
  • Subjects: Business and Management ; Companies ; Entrepreneurship ; Graduations & commencements ; Industrial Organization ; Initial public offerings ; Management ; Microeconomics ; Mothers ; New stock market listings ; R&D ; Regulation ; Regulatory reform ; Research & development ; Securities markets ; Stock exchanges
  • Is Part Of: Small business economics, 2023-02, Vol.60 (2), p.813-841
  • Description: This study explores the graduation of initial public offering (IPO) firms and regulatory reforms in junior stock markets. Using firms listed on the two junior stock markets of the Tokyo Stock Exchange (TSE), the Market of the high-growth and emerging stocks (MOTHERS) and JASDAQ Securities Exchange (JASDAQ), we examine the factors that affect the time to graduation to the TSE main markets. We find that young IPO firms and those with high research and development (R&D) intensity are less likely to graduate from the TSE junior markets (MOTHERS and JASDAQ). The results also reveal that listing regulations on graduation to the TSE main market, which were introduced only to the MOTHERS, but not to the JASDAQ, accelerate the graduation of IPO firms. Furthermore, we provide evidence that IPO firms that ultimately graduate to the TSE main markets exhibit better performance. Plain English Summary Do junior stock markets create better-performing graduations? We investigate this issue using the case of two junior stock markets of the TSE. While young IPO firms and those with high R&D intensity are less likely to graduate from junior stock markets, listing requirements on graduation to main stock markets accelerate the graduation of IPO firms in junior stock markets. Firms listed on a junior stock market with more stringent listing environments are more likely to graduate to main stock markets and exhibit better performance. Our findings suggest that the promotion system introduced through regulatory reforms provides a strong incentive for IPO firms to aim higher and helps create better-performing graduations.
  • Publisher: New York: Springer US
  • Language: English
  • Identifier: ISSN: 0921-898X
    EISSN: 1573-0913
    DOI: 10.1007/s11187-022-00615-8
  • Source: Springer Nature OA/Free Journals
    ProQuest Central
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