Corporate Disclosure as a Transaction Cost: The Case of SMEs

In this paper we consider ways to reduce the information costs of SMEs making recourse to the capital markets. Firstly, we ask whether the listed issuers’ regulation should differentiate amongst types of companies, depending on their financial instruments’ liquidity and/or on their size. Secondly, we ask whether market organization could evolve in ways which could favour a transaction cost reduction for the SMEs intending to access the capital markets through channels different from the IPO and the stock exchange. One of these tools is crowdfund- ing, which allows for a significant reduction of the distribution costs relating to financial instruments, even though the actual reduction of the overall costs – particularly of those relating to disclosure – depends on the applicable capital markets regulation. Private markets are an interesting alternative to crowdfund- ing, but they are also different (both from public markets and crowdfunding) to the extent that only institutional and professional investors are admitted to them. The recourse to private markets generates lower regulatory costs, even if their liquidity is substantially lower than that of public markets.