The amount of raised capital by small IPOs : Spatial effect on the UK Alternative Investment Market

Given the long lived literature on the small firm funding gap and the contemporary evidence on the easier access to equity finance of the London proximate firms, this study aims to examine the relevance of spatial proximity to London in explaining the amount of monies raised by small British firms at Initial Public Offerings (IPOs) on the UK Alternative Investment Market (AIM).

A cross sectional regression analysis is conducted to see whether proximity to London affects the amount of monies raised by small British firms at IPOs.

The results suggest that proximity to London has a positive effect on the amount of monies raised through IPO and, therefore, there exists a London bias even for those small firms which manage to overcome the equity gap problem and achieve a London listing.

The paper contributes to both the economic geography and the small firm regional disparity literature by documenting for the first time that geographic location has an impact on the amount of monies raised by small IPOs in the UK.