Access to stock markets impact on SMEs performance

Abstract

This study investigates the impact of unregulated stock market listing on the financial performance of small and medium-sized enterprises (SMEs) in Europe. The analysis seeks to determine whether listing improves financial performance or whether associated costs outweigh the potential benefits. To address this question, the performance of listed and unlisted SMEs is compared across five key indicators: solvency, liquidity, profit margin, return on assets (ROA), and return on equity (ROE). The sample covers a ten-year period from 2014 to 2023. Statistical analyses were conducted using unpaired Student’s t-tests in RStudio to assess the significance of performance differences between the two groups. The findings reveal a mixed impact of listing on SMEs' financial performance. On the one hand, listed SMEs show significant improvements in solvency and liquidity, suggesting that listing facilitates access to external capital and enhances the ability to meet both short-term and long-term obligations. On the other hand, profitability measures, including profit margin, ROA, and ROE, exhibit a notable decline after listing. This deterioration indicates that while listing improves financial stability, it may simultaneously impose costs and constraints that undermine operational efficiency. Overall, the study provides empirical evidence of SMEs' access to unregulated stock market trade-offs, offering relevant insights for SMEs considering IPOs, investors evaluating SME securities, and policymakers supporting SME financing through stock markets.