The present paper investigates whether small firm entrepreneurs are able to signal the value of their firms to potential investors when seeking a listing on the U.K. Unlisted Securities Market (USM). The signals considered are the percentage of equity retained by the original entrepreneurs, the net proceeds raised by an issue, the choice of advising agents to an issue, the disclosure of an
... [Show full abstract] earnings forecast and the level of underpricing of the new issue. In addition, the possible interactions between the individual signals are considered and included in the analysis. The results of the empirical analysis suggest that firm value is positively and significantly related to the percentage of retained equity and the net proceeds raised: thus suggesting, therefore, that stock markets will invest at higher values, ceteris paribus, if entrepreneurs indicate confidence in their enterprises via levels of equity retention and the funds they intend to invest in future projects.
