Does IPO Free Small Firms from Their Debt Constraints?

This article examines the financial behavior of small and medium-sized enterprises (SME) that went public on Alternext during the years 2005-2013. The results show that growth SME's have a limited debt capacity before going public (IPO). We found evidence suggesting that these firms modify their financial behavior after the IPO: SME's use debt to fund small deficits but turn to equity when external financing needs are large. Even though informational asymmetry has been reduced, IPO does not allow them to raise their leverage ratio, giving evidence that SME's are still financially constrained