Designing an efficient securities market for small and medium-sized enterprises (SMEs): Perspectives for reform

Small and medium-sized enterprises (SMEs) play a vital role in the Canadian economy. While the growth and success of these enterprises do not depend solely on financial support, access to financing is critical for their expansion. In this respect, public equity financing performs a crucial function among the various sources of capital in the funding of growing SMEs. Accordingly, it is essential that smaller enterprises for which going public is justified are able to access the public equity market.The issue of the accessibility of public equity financing implicates directly securities legislation, which regulates capital markets. Thus, the purpose of this dissertation is to examine the role of securities regulation in enhancing capital formation by entrepreneurial firms. The dissertation focuses more particularly on the initial public offering (IPO) market because of the vital function that it performs in allocating capital to enterprises.The dissertation analyses the institutional setting in which securities are issued and priced for factors that contribute to an efficient market. Drawing on a review of the empirical research literature on the pricing efficiency of the initial public offering market, it underlines the market imperfections that may hinder SMEs' access to the equity market and that regulation should seek to correct. Ile dissertation also studies the regulatory framework governing the IPO market and shows that it is not adapted to the particularities of SMEs and imposes thereby unnecessary barriers to the financing of SMEs. Taking as a starting point the work of the Ontario Securities Commission Task Force on Small Business Financing, the dissertation then examines specific proposals to facilitate securities offerings by SMEs. While the dissertation concerns primarily the IPO market, it addresses some aspects of the development of an active and liquid secondary market for small and medium-sized enterprises. In performing the revision of the regulatory framework this dissertation emphasises the need for the implementation of a cost-effective regulatory regime governing the securities market.