The alternative investment market and its relevance to SMEs

Abstract

Purpose: The aim of this study is to examine whether SMEs could benefit from the introduction of an Alternative Investment Market in Malta and explore the problems they encounter with present sources of financing. The research idea was prompted since Maltese SMEs suffer from a lack of financing options and the Regulated Main Market is unreachable for local SMEs due to high costs and stringent regulations. Also, this study aims to investigate the role of the corporate advisor in the Alternative Investment Market. Design: The study applied a qualitative research technique. Semi-structured interviews with high ranking officials in the Maltese Stock Exchange, a corporate advisor and four Prospects MTF listed companies were conducted to obtain their insights on the study. Findings: The findings of the study indicate that there is an agreement across the different professionals participating in the study that the introduction of the Alternative Investment Market in Malta is a useful financing tool for SMEs who need funds for a project or want to tap into the capital markets. This study suggests that costs have been reduced significantly for SMEs and they offer an alternative to bank financing which is the most popular financing source for local SMEs. In order for SMEs and investors to be safeguarded, findings suggest that the role of the corporate advisor is pivotal to ensure that corporate governance practices in listed companies on the Alternative Investment Market is in place. Conclusions: The study concludes that Alternative Investment Market is a viable source of finance for ambitious SMEs with a feasible business plan in place. The Alternative Investment Market in Malta is offering flexibility to SMEs and the chance to issue an equity or bond offer at lower costs. The study shows that listed SMEs would like regulation to be less stringent which can attract more SMEs to the market. If these issues are resolved, and the corporate advisor and regulator work together to ensure that SMEs are holding to their corporate governance obligations, the Alternative Investment Market in Malta will continue to grow and establish itself as one of the main alternatives to bank financing. Value: This study is original since it is the first to investigate the impact of an Alternative Investment Market in Malta and its relevance to local SMEs. It may prove valuable to the Maltese Stock Exchange to gather feedback from listed SMEs on their experience in the Alternative Investment Market.