Abstract
This paper compares the performance of firms that first go public on the Toronto Venture Stock Exchange (TSX-V) and then graduate to the senior Toronto Stock Exchange (TSX), to the performance of VC-backed firms that directly have an IPO on the TSX. Controlling for potential selection biases stemming from the original selection of listing on the TSX-V rather than receiving a private VC injection, as well as from the subsequent selection of listing on the TSX, we find TSX-V graduations on average outperform VC-backed IPOs by 28.2 percentage points in the three years following the TSX listing. Overall, our results indicate that the TSX-V is an effective “incubator” market for developing firms, and thus provide important policy and regulatory insights.
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