Does listing on the JSE’S Altx improve the performance of small and medium-sized enterprises?

Abstract

AbstractSmall and medium enterprises (SMEs) serve as pivotal drivers of global economic growth, a consensus reiterated by influential scholars. Yet, a critical challenge impeding their progress is the limited access to capital financing, hampering the expansion prospects of countless small businesses worldwide. In South Africa, this dilemma is especially pronounced, with many SMEs either struggling or shuttering due to financial constraints. The Johannesburg Stock Exchange (JSE) devised a solution: The Alternative Exchange (AltX), a dedicated platform designed to ease capital financing for SMEs and boost their growth. In this study, we used secondary data obtained from the lower bourse, as well as other relevant databases for the period 2003 to 2019 to ascertain its impact on SME performance. Eviews 12 statistical software package was used to carry out an Ordinary Linear Regression (OLS) empirical analysis. We find that SME listing positively influences small business performance in South Africa. Furthermore, these listed firms’ continued expansion is propelling them to become larger enterprises within a remarkably short span, transcending national borders. Our results robustly affirm a positive correlation between AltX listing, market capitalization, revenue, their Broad-Based Black Economic Empowerment (B-BBEE) score, Earnings Before Interest, Taxes, Depreciation, and Amortization (EBITDA), and improved SME performance. Moreover, this contributes to the existing literature by empirically proving that the boost in SME performance aligns with heightened GDP growth, suggesting a symbiotic relationship between the two. We recommend that policymakers should offer incentive schemes to enhance their performance given its impact on sustainable national growth and development.

Keywords

• alternative exchange
• entrepreneurship
• Johannesburg stock exchange
• small and medium enterprises