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Book part
Publication date: 19 February 2024

Quoc Trung Tran

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Dividend Policy
Type: Book
ISBN: 978-1-83797-988-2

Article
Publication date: 1 June 2023

Terry Marsh and Kylie Jennifer Gilbey

Australian Securities Exchange (ASX) initial public offerings (IPOs) are an important source of early-stage capital and have also driven a substantial increase in main-board…

Abstract

Purpose

Australian Securities Exchange (ASX) initial public offerings (IPOs) are an important source of early-stage capital and have also driven a substantial increase in main-board listed companies post-millennium. By contrast, Australian venture capital (VC) funding has remained largely dormant. The opposite has occurred in the US: IPOs have fallen by half, and VC funding has surged. The authors examine the reason for this divergence between ASX IPO and US VC systems that, with their supporting ecosystems, have many features in common and function similarly. The authors explore the potential factors that could explain the US VC surge vis-à-vis Australia's VC stagnation.

Design/methodology/approach

The authors’ analysis is predominantly qualitative. The authors describe the Australian listing process and its similar features and functions as for the prototypical VC. The authors also describe the developments in US VC driving its recent exceptional surge and highlight that such developments have not yet materialised on the Australian scene, where early-stage IPOs have served as a substitute.

Findings

The ASX's structure and ecosystem have been critical to its success in fostering early-stage main-board listings. While the US has succeeded in alternatively growing VC, there is an increasing concern that the latter has occurred partially because valuations are stretched, tax concessions for carried-interest capital gains are too high and corporate control benefits are becoming increasingly diluted. These developments could have important implications for Australia, where VC structures are currently being reviewed.

Originality/value

To the best of the authors’ knowledge, no prior study has attempted to bridge the broad differences in IPO and VC funding trends for early-stage companies in Australia and the USA.

Details

Journal of Accounting Literature, vol. 46 no. 1
Type: Research Article
ISSN: 0737-4607

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