The Dark Side of Junior Stock Exchanges

Santa Clara University
Stanford University

Market catalysts, like incubators, science parks, and junior stock exchanges, are created with the intention of stimulating venture creation and economic growth. However, a study published in the Strategic Management Journal shows that intermediaries have un-intended negative consequences. Bob Eberhart, a graduate of Stanford’s Department of Management Science and Engineering, and Charles Eesley, an Associate Professor in Stanford’s Department of Management Science and Engineering, analyzed the performance of over 19,000 firms in Japan. Their study shows that increased competition and information asymmetry unintentionally led to fewer quality IPOs and ultimately less economic growth.