Alternative Investment Market Research Articles

Return predictability of prospect theory: Evidence from the Thailand stock market

Using Thailand stock market data, we find that prospect theory has strong predictive power for returns. This predictive power is strengthened during crises and bear and bull markets. The loss aversion component is the main contributor to the increased predictive power during crises and bear markets. In contrast, the probability weighting and concavity/convexity components contribute more to the predictive power during bull markets. Prospect theory has stronger predictive power in the Market for Alternative Investment than in the Securities Exchange of Thailand, providing evidence that individual investors prefer the mental presentation effect and evaluate risk in a way described by prospect theory.

NPL 프로세스 분석 기반 대체투자 표준화를 위한 서비스융합디자인 연구

The purpose of this study is to design an alternative investment standardization to resolve price opacity and information asymmetry, which are the specific characteristics of the alternative investment market, and to present a service design to improve communication. To this end, bad loans with real estate collateral, art distribution market characteristics, and price index models were examined, and service blueprints, one of the service design methodologies, were used to analyze the investment process of quantitative and qualitative assets, two forms of alternative investment, and to determine the value of stakeholders. Through this analysis, alternative investment standardization was designed, and based on this, a communication service design that can improve the user experience of art investment was presented.

Extreme illiquidity and stock returns: Evidence from Thailand market

Extreme illiquidity (EIL) is priced in the cross-section of stock returns in the Thailand market. The EIL premium permeates stock categories with various risk factor loadings and characteristics. EIL is persistent and has predictive power for expected stock returns to at least a one-year horizon. The Market for Alternative Investment (MAI) with a higher proportion of individual investors, who are more active in trading than institutional investors, carries a higher EIL premium than the Stock Exchange of Thailand (SET). While the tradable EIL factor captures an important source of risk missed by the conventional risk factors, EIL as a characteristic has higher explanatory power in the cross-section than EIL as a covariance risk.

The Relationship between Managerial Ownership and Firm Performance Mediated by Real Earnings Management of Thai IPO Firms

This study aims to examine the effect of managerial ownership on firm performance, both directly and through real earnings management as a mediating variable, during the pre- and post-initial public offering (IPO) years. Thai quoted companies on the Market for Alternative Investment (MAI) between 2012 and 2017 are analyzed. The findings reveal that before the IPO year, higher managerial ownership exhibits a positive association with firm performance, and this relationship is fully mediated by real earnings management. However, after the IPO, managerial ownership no longer significantly affects firm performance, and real earnings management acts as a mediating variable. These findings highlight the changes in ownership structure during the transition from private to public companies. The decline in managerial ownership post-IPO strongly suggests a potential loss of control and influence, which could impact strategic decisions, financial reporting practices, and operational efficiency. This research adds valuable and important insights to the previous studies on managerial ownership, earnings management practices, and firm performance, offering policymakers, investors, and market participants a better understanding of these dynamics. Nonetheless, it is critical to note that the study’s focus on the MAI in Thailand may limit the generalizability of the findings, so further research is strongly advised to be undertaken in diverse markets and contexts.

Grabbing Investor Attention with Limited Resources: A Study of Small Cap Firms’ Communication Channels

This paper examines the communication strategies employed by small cap firms listed on the Alternative Investment Market (AIM) of the London Stock Exchange. These small cap firms have great discretion in choosing their communication channels with investors and evolve in an environment with few information intermediaries. We investigate the use of three communication channels – press releases, conference calls, and social media – specifically surrounding earnings announcements. Our findings indicate that small cap firms utilize these three communication channels infrequently. However, when announcing positive earnings news, small cap firms are more likely to employ these channels, suggesting that firms communicate opportunistically. We find a positive association between the use of communication channels, particularly of social media, and measures of investor attention. Interestingly, while the use of communication channels is associated with positive stock returns surrounding earnings announcements, social media usage prior to earnings announcements is linked to subsequent stock price reversals. These findings provide insights into the communication practices of small cap firms and their implications for investor attention and market efficiency.

Factors affecting the market value of junior mining companies listed on the Alternative Investment Market (AIM) London

Factors affecting the market value of junior mining companies listed on the Alternative Investment Market (AIM) London

Effects of board characteristics on information asymmetry: Evidence from the alternative investment market

This study aimed to investigate the effect of board characteristics on information asymmetry as well as examining whether the disclosure environment moderates the association between board structure and the information asymmetry of listed firms in the UK. We primarily focus on six characteristics of board composition (board size, board independence, board financial expertise, board busyness, CEO duality, and board gender diversity) and their impact on the bid–ask spread (employed as a proxy of information asymmetry). This study used the ordinary least squares (OLS) model to examine these associations. Moreover, we used system GMM and lag estimation models to test for endogeneity problems. Using a sample of 5950 observations representing the non-financial firms listed on the Alternative Investment Market (AIM) for 10 years from 2010 to 2019, we found a negative and significant relationship between board size; board independence; and female directors and information asymmetry. However, board busyness and CEO duality are positively related to information asymmetry. Furthermore, we demonstrate that information disclosure moderates the relationship between board characteristics and information asymmetry; that is, board size, independent directors, and female directors mitigate information asymmetry by improving the level of information disclosure. By contrast, busy directors and CEO duality increase the problem of information asymmetry by reducing firms’ information disclosure. The results of this study have implications for UK regulators, firm boards of directors, and firm stakeholders.

The determinants of audit fees in the alternative investment market (Aim) in the UK: Evidence on the impact of risk, corporate governance and auditor size

This study examines the determinants of audit fees for companies listed on the Alternative Investment Market (AIM) in the United Kingdom (UK), which is the secondary market of the London Stock Exchange for small and medium sized companies. AIM companies are expected to present different audit pricing challenges compared to fully listed firms. From an audit demand perspective, AIM companies exhibit different risk and governance characteristics while, from a supply perspective, the AIM is characterized by greater auditor choice than typically found in main markets. We find that audit fees in the AIM are negatively influenced by client liquidity and the length of listing. We also find that higher levels of audit committee disclosures are associated with higher fees, although there is no evidence that individual audit committee characteristics influence audit fees. After controlling for self-selection bias, we find that Big 4 auditors charge higher fees and this premium is especially pronounced for smaller firms. Our findings contribute to the audit pricing literature by illustrating that the determinants of audit fees depends on the institutional setting in which companies operate as well as highlighting the importance of specific risk measures and auditor size in the determination of audit fees for AIM companies.

Endogenous market choice, listing regulations, and IPO spread: Evidence from the London Stock Exchange

AbstractThis study examines the endogenous market choice and its impact on underwriter spread if Alternative Investment Market (AIM) IPOs that meet Main Market (MM) listing requirements had issued equity in the MM during the 1995–2021 period. We find that the spread is 1.33% higher in the AIM than the MM for IPO listings that meet the MM listing requirements. This finding suggests that AIM companies, meeting the MM listing requirements, could have saved more than £100 million by going public through the MM than the AIM market. We also find that this spread differential is attributed to the issuing firms' market self‐selection. We demonstrate that listing requirements in the MM have an impact on the gross spread. The Propensity score matching results show that AIM firms that meet the MM market listing requirements pay a 0.921% higher spread which is significant at a 1% level compared to the MM market IPOs.

ESG Performance and Corporate Financial Risk of the Alternative Capital Market in Thailand

This study aims to investigate the pattern and level of environmental, social and governance (ESG) performance of listed companies in the alternative capital market of Thailand, and (2) to test for the relationship between ESG performance and corporate financial risk. The population and sample data are comprised of all the listed companies in the alternative capital market in Thailand, namely, the Market for Alternative Investment (MAI). Content analysis by scoring is used to quantify ESG performance in annual reports during the period 2017–2021, while corporate financial risk is measured by the ratio of debt on equity. Descriptive analysis, correlation matrix, and multiple regression are used to analyze the data of this study. The average scores of ESG performance are 6.182 out of 11 scores. In addition, there is an increase of ESG performance in annual reports of the listed companies from 5.540 to 7.180 scores during the period being studied. Finally, the result finds a negative relationship between ESG performance and corporate financial risk. The signaling theory demonstrates an explanation proposing that the increase of ESG performance can reduce corporate financial risk. Therefore, top-management and shareholders should pay attention to ESG responsibility because it can decrease risk as well as enhance sustainable development.

Impact of Shareholder Structure on Earnings Manipulation in Thai IPOs on the Market for Alternative Investment (mai): Pre-and Post-IPO Analysis

Impact of Shareholder Structure on Earnings Manipulation in Thai IPOs on the Market for Alternative Investment (mai): Pre-and Post-IPO Analysis

The effect of gender board diversity across market quotation on firm performance: Evidence from the UK

This paper examines the impact of gender board diversity on firm performance for companies registered on the London Stock Exchange (LSE). The data has been collected from a unique set of 644 financial companies in the Main (MAIN) market and Alternative Investment Market (AIM) for the period 1999–2016. The firm performance has been measured using return on equity (ROE) and Tobin’s Q. The main independent variable is the female board diversity, which was distinguished into executive and non-executive females. In the MAIN market, the executive female directors negatively affect the firm’s financial performance; however, the non-executive female directors positively impact the firm’s financial performance. Furthermore, the positive effect of non-executive female directors in the bad market is higher than in the good market. Whereas the negative effect of the executive female directors in the bad market is lower than in the good market. To the best of our knowledge, this paper contributes to the corporate governance literature in two folds. First, this paper explores the effect of executive and non-executive female directors on the board on the firm performance. Second, the paper also scrutinizes such associations in two different regimes of the financial market.

Staying Power of UK Buy-outs

This paper examines 1,089 private equity (PE) backed and non-PE backed (pure) UK buy-outs, determinants of their survival, and their exit behaviour during the period of 1966–2004. Our results suggest that 56% of the pure sample buy-outs remained in a buy-out organisational form for at least seven years after the original buy-out transaction, thus lending support to views that buy-outs present long rather than short term form. PE backed buy-outs exhibit higher exit rates, fewer early (within 12 months) exits and fewer liquidations than their pure counterparts. Buy-outs sponsored by PE syndicates, those harvested during periods with strong market conditions and greater supply of PE funding, tend to have shorter longevity. The most notable difference between the survival experiences of PE backed and pure buy-outs is documented in IPO exits, where a significant number of pure buyouts exit early to the Alternative Investment Market (AIM).

International Experience Strategic Analysis of Financing Small Innovative Enterprises

The article analyzes the international experience of financing small innovative enterprises. The internal environment analysis of the small innovative enterprises financing infrastructure was carried out in China, Israel, European countries and the USA. The study touched upon a number of instruments that finance innovative enterprises, such as state financial support, the venture industry, the alternative investment market (various types of crowdfunding). Based on the conducted strategic analysis, the strengths and weaknesses of the small innovative enterprises financing infrastructure in the analyzed countries were identified. The conducted study of international experience will allow in the future to more comprehensively approach the strategic priorities development of the small innovative enterprises financing infrastructure in Russia at the national and regional levels.

Factors Affecting Listing of Small and Medium Enterprises on LuSE Alternative Investment Market in Zambia: A Case of Lusaka Business District

Economic growth in both developed and developing nations is strongly linked to the growth of alternative investment markets. Alternative markets for the listing of start-up companies have been established and launched by many exchanges in order to assist small and medium businesses in raising finance through initial public offers and listing their shares for trade. The rise of these alternative markets has been slow, particularly in poorer countries. The study’s major goal was to discover the characteristics that influence SMEs’ ability to list on the Lusaka Stock Exchange Alternative Investment Market (LuSE AIM). Examine whether information accessibility is a critical factor in determining SMEs listing on the Alt-M; determine if regulatory requirements are a factor to consider when SMEs decide to register on the AIM; determine if corporate governance is an important factor in determining SMEs listing on the AIM; and determine if SMEs support platforms are important factors in determining SMEs listing on the AIM. The study used a quantitative cross-sectional design using a survey as the research approach to attain this goal. The approach was deemed appropriate and useful towards assessing of the elements influencing listing of SME firms on the securities exchange. The population of the study included all 1663 SMEs registered under Zambia Chamber of Small and Medium Businesses Association in Lusaka. Stratified sampling technique was used for the study where random sampled quotas were selected from each industry. The sample size of SMEs derived 322 companies and only 161 SMEs successfully participated in the study as respondents. Primary data were used to obtain information in this study using closed-ended questionnaires. To identify the characteristics that influence the listing of SMEs on the stock market, the study used quantitative analysis and factor analyses. The parameters that determine the listing of SMEs on the Alternative Securities Market were identified using factor analysis. Factor I (information accessibility), Factor II (regulatory needs), Factor III (business governance), and Factor IV (corporate governance) identified as the four elements (SMEs support platforms). Information accessibility, enabling legislative requirements, sound corporate governance, and SMEs support platforms were identified as the barriers to small and medium firms receiving finance through the LuSE Alternative Investment Market, according to the conclusions of the research study. The findings of the study suggest that availability to information is critical to listing, and that a regulatory environment that is friendly to small and medium firms will encourage them to list. Furthermore, while corporate governance is not a prerequisite for SMEs to list, good corporate governance practices have been proven to promote SMEs to list. According to the survey, relevant authorities should educate SMEs on the critical information required for securities market listing so that they may make educated judgments. Policymakers should make it easier for SMEs to expand by enacting favorable policies and making it easier for them to list on the AIM. Corporate governance regulations should be tailored to the structure and environment of SMEs by policymakers. The government should develop an atmosphere that includes support systems tailored to SMEs. Putting support platforms in place increases SMEs’ desire to list.

Energy Conservation and Firm Performance in Thailand: Comparison between Energy-Intensive and Non-Energy-Intensive Industries

This study investigated and compared energy conservation levels between listed companies in energy-intensive industries and non-energy-intensive industries in Thai capital markets. It also tested the impact of energy conservation on firm performance using companies in the two industries. The sample for the study was sourced from 552 companies in the Stock Exchange of Thailand (SET) and 169 companies in the Market for Alternative Investment (MAI). The data was collected from the companies' annual reports spanning the period from 2016 to 2020. Descriptive analysis, independent sample t-test, and unbalanced panel data analysis were used to analyze data. The findings revealed that energy conservation scores for Thai-listed companies were generally stable, averaging between 0.45 and 0.46. It was also revealed that the energy conservation of companies in energy-intensive industries was significantly greater than that of companies in non-energy-intensive industries, with average scores of 0.55 and 0.43, respectively. Additionally, the study found that energy conservation has a positive impact on the firm performance of energy-intensive industries, while no significant impact in energy-intensive industries was recorded. The findings demonstrate that stakeholder and legitimacy theories can help explain how energy conservation benefits companies in terms of increased firm performance.

Factors Affecting Listing of Small and Medium Enterprises on LuSE Alternative Investment Market in Zambia: A Case of Lusaka Business District

Factors Affecting Listing of Small and Medium Enterprises on LuSE Alternative Investment Market in Zambia: A Case of Lusaka Business District

Earnings Management and the Reputation of Nomads Around IPOs: The Experience of the UK Alternative Investment Market

The research problem We examined whether the reputation of the nominated advisor (Nomad) impacts the accrual and real earnings management of initial public offering (IPO) firms on the Alternative Investment Market (AIM) of the London Stock Exchange in the UK. Motivation and theoretical reasoning While the role of Nomads on the AIM is a significant determinant in ensuring the integrity of the financial reporting quality of their advisee firms, to date, there has been no analysis of the impact of Nomads on such reporting activities. The test hypothesis The main hypothesis of this study tested whether IPO firms that appoint a more reputable Nomad exhibit a lower level of accrual-based and real-based earnings management during the IPO. Target population The initial sample of this study consisted of all IPO firms that went public on the AIM between January 1998 and December 2008. After restricting the sample to non-financial IPO firms with the necessary data available to estimate accrual and real earnings management and Nomad reputation, the final sample consisted of 432 IPO firms that are backed by 80 Nomads over the sample period. Adopted methodology Two real earnings management activities were examined: sales-based manipulation and discretionary expenses–based manipulation. Discretionary accruals were estimated as a proxy of accrual earnings management. To construct the unweighted index of Nomad reputation (NOMAD), data were manually collected for the number of IPOs backed by a Nomad, proceeds of IPOs backed by the Nomad, the Nomad’s age, and the Nomad’s credit score. Analyses Following prior research, several techniques and regressions were employed to test the hypothetical relation between Nomad reputation and accrual and real earnings management. As for robustness, both Heckman and instrumental variable (IV) regressions were used to control for sample selection bias, and a three-stage least squares (3SLS) estimation approach was used to test for the two-way interaction between Nomad reputation and earnings management. Findings This paper found evidence that more reputable Nomads on the AIM play a significant role in constraining the use of accrual-based and real-based earnings management during the IPO year by their advisee IPO firms. This is also the first evidence on the significant role of reputable financial institutions and intermediaries in monitoring the financial reporting quality in less regulated markets such as the AIM in the UK.

Specialists, Generalists, or Both? Founders’ Multidimensional Breadth of Experience and Entrepreneurial Ventures’ Fundraising at IPO

Different streams of research have led to contradictory conclusions about the venture performance implications of founders’ breadth of experience. Although extant empirical studies have explored the performance implications of founders’ breadth of experience at the start-up stage, we focus on the later stage of the initial public offering (IPO). We theorize that investors categorize venture founders based on two salient dimensions—their industry and functional background—and we relate this categorization to resource acquisition at IPO. To test our model, we use a hand-collected data set of 175 entrepreneurial IPOs in the Alternative Investment Market in London (2002–2013) and two randomized experiments. We theorize and find that compared with entrepreneurial ventures with a lead founder specializing in one industry or one function, investors generally devalue those with a category-spanning lead founder (a generalist). However, devaluation is less severe when a lead founder is a generalist in one dimension (e.g., industry) but a specialist in the other dimension (e.g., function). We also theorize and empirically test trust as a mechanism for the generalist penalty. Specifically, audience members (investors) have low trust in a generalist producer (founder) in contexts where the two parties consider entering into a partnership (equity investment at IPO), and so that generalist producer is devalued. Finally, we show that an external expert endorsement—in our case, from intensive venture capital affiliations—offsets the generalist penalty, especially when category spanning occurs in multiple category dimensions. Funding: This work was supported by the University of St. Gallen and the Natural Science of China [Grant 71832012]. Supplemental Material: The e-companion is available at https://doi.org/10.1287/orsc.2022.1581 .

Related Party Transactions on the London Stock Exchange: What Works and What Does Not?

The rules governing companies listed on the Main Market of the London Stock Exchange (LSE) and its Alternative Investment Market (AIM) fill an important gap in the general law regulating related party transactions (RPT). The regulatory techniques used in these ‘Exchange rules’ are principally disclosure to the market at the time of the transaction and, in a more limited range of cases under the Main Market rules, prior approval of the transaction by a majority of the uninvolved shareholders. This article investigates the outcomes of these rules by analysing the RPT announcements made by companies on these two markets over a twelve-month period beginning in June 2019. These announcements related to nearly 500 RPT. The article concludes that neither mechanism works at an optimum level. The Main Market shareholder approval requirements catch only a small number of companies, predominantly outside the FTSE 350. The disclosure rules omit an important element in the information the market needs, namely the company’s analysis why the transaction is considered fair. In cases where there is an operative shareholder approval requirement (from whatever source), then the need to obtain shareholder approval is likely to force revelation of the company’s fairness analysis, but this driver does not operate across the majority of RPT. The article makes some suggestions for simple reforms to address these defects. related party transactions, London Stock Exchange, disclosure to the market, shareholder approval, authority to issue shares, pre-emption, independent directors, fairness certification