European Equity Markets, SMEs and the Growth Challenge

This study investigates factors influencing market capitalization and investment opportunities for smaller firms in European equity growth markets. Focusing on Italy, France, Germany, Sweden, and Spain, with the UK for comparison, the analysis uncovers substantial disparities in market capitalization, listed firms, and household portfolios across these nations. Variations in both capital supply and demand factors are highlighted to rationalize these dynamics. Sweden emerges as a leader in growth markets due to lenient IPO requirements and lower costs, while household portfolio allocations significantly affect capital supply. Higher financial literacy, found in Sweden and Germany, leads to more sophisticated portfolios. The Capital Markets Union (CMU) initiative’s role in supporting SME growth is acknowledged, with room for improvement. Additionally, sovereign wealth funds’ potential as significant investors in SMEs is discussed, bolstering their chances of listing on growth markets.