European IPO Markets: The Post-Issue Performance Imperative

Abstract

European secondary markets appear to have so far failed as providers of capital for emerging growth companies. Conventional explanations focus on the supply side of the market, blaming over-regulation, complex listing requirements, the absence of an equity culture, weak competition between national markets, and a shortage of growth companies. This paper highlights significant underperformance in long-term IPO returns in European markets, possibly affecting demand by Investors. Alternative demand-side factors, such as constraints on Institutional investments in small cap stocks and the consequent lack of supporting analysts, and methodological Issues in measuring long-term performance, are also discussed.