Understanding SME IPOs Performance: A Review of Key Determinants and Future Research Directions (International Journal of Research in Finance and Management)

Summary

• Dedicated platforms BSE SME and NSE Emerge were established in India in 2012 to give small and medium enterprises access to public equity markets.p.1
• The review synthesizes empirical and theoretical research articles on SME IPO performance published between 2020 and 2024.p.2
• A cited empirical study of 390 SME IPOs listed on BSE SME and NSE Emerge found that ownership concentration had a strong negative impact on underpricing.p.3
• SME IPO performance is shaped by four distinct determinant categories: firm-level factors, IPO-level factors, corporate governance, and information-related factors.p.1
• SME IPOs in emerging markets frequently display initial short-term listing gains that contrast with weaker long-term post-IPO market performance.p.2

Key insights

1. SME IPOs experience higher levels of information asymmetry, shorter operating history, and greater valuation uncertainty than larger main-board firms.p.1
2. In India, the launch of dedicated platforms BSE SME and NSE Emerge in 2012 provided small businesses with formal access to public equity financing.p.1
3. In a study of 390 SME IPOs on BSE SME and NSE Emerge, ownership concentration exerted a strong negative effect on IPO underpricing.p.3
4. The resource provision role of the board of directors negatively moderates the effect of ownership concentration on underpricing, while the monitoring role shows no significant effect.p.3
5. Underwriter reputation and retail demand drive listing-day returns, but high initial investor demand does not ensure sustained post-listing performance.p.2
6. Accounting conservatism significantly relates to IPO underpricing and post-issue stock performance in Indian SMEs.p.2
7. Information asymmetry, signaling, and agency theories form the primary theoretical framework explaining SME IPO pricing and post-listing performance.p.1