Growth and Independence through Equity Financing
Study highlights the importance of equity financing for innovation and growth in German SMEs in the wake of the financial crisis
The importance of equity financing has become a bigger issue both for companies and the public in general as a result of the financial crisis. Structural changes in corporate financing are a result of changes in the credit markets and the increasing harmonization between the transparency requirements of lenders and equity providers. A joint study conducted by the Technical University in Munich, Ernst & Young and Deutsche Börse examined the reasons for this trend towards an excess of equity, and analyzed the importance of IPOs for business performance and the economy.
“The majority of companies use IPOs to finance growth strategies and strengthen their equity base,” said Frank Gerstenschläger, member of the Executive Board of Deutsche Börse. “The study clearly shows that an IPO boosts companies’ domestic and foreign sales, encourages broader diversification and higher spending on research and development.”
According to Ulrich Lenz from Ernst & Young, the study shows that for many companies, there will be no return to traditional-style bank and debt financing, “Only with a broad financing approach and a clear focus on equity can companies secure their future independence and embark on new routes towards profitable growth,” said Ulrich Lenz.
Christoph Kaserer, professor at Munich’s Technical University said that the study also reveals a series of obstacles which still have to be surmounted en route to deeper equity markets and a strong equity culture. According to him, other countries – particularly Anglo-Saxon ones – have already overcome these obstacles. “Germany has to find a way to develop a more active equity market for both the supply side (investors) and the demand side (companies).”
The study, entitled “Corporate Growth and Entrepreneurial Independence through Equity Financing – Structural Changes and New Approaches for the German Mittelstand in the Current Financial Crisis” will be presented at the 13th German Equity Forum Fall in Frankfurt from 9-11 November 2009. A panel discussion will follow the presentation.
The German Equity Forum is organized by Deutsche Börse and KfW Bankengruppe. It is the largest international information and networking platform for companies seeking equity capital.
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