Capital market access for SMEs : a comparative analysis of Malta's prospects and London's alternative investment market

Abstract

SMEs are strategically important within the global economy, based on their significant contributions to economic growth and development, and employment creation. Nevertheless, SMEs face several hurdles that hinder them from attaining their full potential. Through secondary research, this study determines that the major obstacle in SME growth is their financial crunch, caused by the lack of availability of funding options. This study also assesses the various financing options available to SMEs, with a focus on the SMEs’ capital market access. Furthermore, through secondary research, this study also includes an in-depth comparison between two alternative investment mechanisms, being Malta's Prospects MTF and the UK’s Alternative Investment Market, with a focus on the markets’ historical backgrounds and published statistics, the key features and benefits, and the eligibility requirements of such markets. Through primary research, this study also examines the effectiveness of alternative investment markets as an alternative method of funding. This is done through a statistical comparison of the financial ratios of companies listed on both markets, to determine the effect of admission to such markets on the companies’ financial position. Lastly, this research project includes an analysis of the Prospects MTF product parameters to determine whether anything can be ameliorated to make this market more accessible to SMEs. It was concluded that although the UK’s AIM has witnessed a huge success, with high volumes of trades and listed companies, whereas Malta’s Prospects is still at an early stage, the Prospects market is showing promising growth, and with the recommendations to amendments in the modus operandi of the Prospects market as identified in chapters 4 and 5, the market and the listed SMEs are likely to continue following a positive long-run performance. The author also recommends for the MSE to generate increased awareness about prospects, as this is likely to help the market attract more SMEs.