The Effect of Public Offering on Financial Performance in SMEs: An Application in BIST Emerging Companies Market

Abstract

The concept of Small and Medium Sized Enterprises (SME) is a concept used in almost all countries. The size expressed by the concept varies between countries depending on economy, sector, industrialization level, market size, and production method used. The SMEs lie behind today’s all big firms, many risky enterprises, innovations and patents. When these functions and their important roles in the economy are considered together with the relatively weak structure and low opportunities they have, supporting SMEs is still important for a country’s economy and so, various programs are being implemented in many countries in this respect. In this context, the Emerging Companies Market (ECM) was established in Turkey in 2011 as a distinct market within Borsa İstanbul (BİST) to create a transparent and organized platform where securities, issued in order to raise funds from the capital markets by companies with growth and development potential, can be traded. Thanks to the ECM, such companies will have the opportunity to raise funds while presenting themselves better, and adding to their visibility among investors as well as their operational markets. In the light of all of these information, we explained SMEs' strengths and weaknesses and their financing problems by referring to all the above mentioned items, and then talked about the benefits of public offering in our work. And BİST-ECM is introduced and their examples in the world are mentioned. In the application phase, the financial performances, before and after the going public, of the companies traded in the BİST-GİP were compared based on the year when the they going public. In the study, return on asset (ROA) and return on equity (ROE) were used as financial performance indicators. Both of these ratios were obtained from the financial statements of the SMEs one year before and one year after the going public. The aim of the study is to measure whether there is a relationship between the public offering of SMEs and their financial performance. In this context, hypothesis established to analyze the relationship between the public offering of SMEs and their financial performance was measured by means of paired t-test. As a result of the study, it was determined that there was no statistically significant relationship between the financial performance of SMEs and public offering.