This chapter provides an overview of the composition of the investor base of companies listed on growth markets and compares it with that of companies listed on main markets. It also explores the availability of dedicated vehicles investing in growth companies and the restrictions some of the key institutional investors may face when investing in growth company stocks. The chapter also explores the availability of market makers and research coverage for companies listed on growth markets.
Equity Markets for Growth Companies
Abstract
The structure and dynamics of equity markets for growth companies are shaped by several key factors, including the investor base, the availability of market makers and the level of research coverage. Unlike main markets, where institutional investors are major owners of listed companies, growth markets show a higher presence of strategic individual and corporate investors, reflecting the founder‑driven nature of these companies. In addition, secondary market liquidity and price efficiency in growth markets also depend on market makers who can facilitate trading by providing bid‑ask quotes. Moreover, one of the persistent challenges for growth companies is the limited availability of independent research coverage, which can affect investor awareness and market participation. This section examines the composition of the investor base, the functioning of market makers and the availability of research coverage, all of which play a critical role in shaping the ecosystem for listed growth companies.
The investor composition of companies listed on growth markets differs significantly from that of companies listed on main markets. In particular, strategic individuals are prominent shareholders in growth markets and hold almost a third of total equity, compared to 7% in main markets (Figure 3.1). This suggests that founders and key shareholders maintain substantial control of listed growth companies, possibly due to the early‑stage nature of these companies. Corporations also play a significant role as owners of listed growth companies, with around 17% of the total equity. This may be because larger companies invest in growth companies as part of their innovation and expansion strategies (Freytag, 2019[40]). By contrast, the public sector is a less important owner of listed growth companies.
Another important feature is the limited presence of institutional investors in growth markets, where they hold only 18% of the total equity, which is significantly less than in main market companies. This is largely because growth companies are generally not the primary investment target of these investors. An additional disincentive for institutional investors is sometimes the small scale of growth company stocks. In recent years, the growing popularity of index‑based investment strategies has had a significant impact on institutional investor asset allocation. As most indices weight companies based on market capitalisation and free float, smaller companies tend not to be captured in these indices. As a result, institutional investors tend to allocate capital to larger, more established companies, further limiting their exposure to growth companies.
Note: Investors are classified following (OECD, 2019[41]),Owners of the World’s Listed Companies. Strategic individuals are those required to disclose their shareholdings in a company. This group typically includes individuals with significant shareholdings, such as the CEO, board members, controlling owners, members of a controlling family and family offices. They should not be confused with retail investors. The ownership structure is calculated based on 6 685 listed companies on growth markets and 24 595 listed companies on main markets. The calculation is based on the holdings weighted by market capitalisation.
Source: OECD Capital Market Series dataset, LSEG, FactSet, Bloomberg; see Annex for details.
A consistent pattern is evident when looking at the holdings of strategic individuals and institutional investors across markets (Figure 3.2). In all of them, strategic individuals own a larger share of equity in companies listed on growth markets than in companies listed on main markets. In India, for example, strategic individuals own 62% of the listed equity of growth companies but only 11% of main market companies, suggesting that Indian growth markets are predominantly founder‑driven or controlled by key shareholders.
Further, institutional investors own a smaller share of listed growth companies than of main market companies. For instance, in Canada, institutional investors hold 49% of main market listed companies but only 9% of listed growth companies. The United States and the United Kingdom are unique in that institutional investors own more than half of the equity of companies listed on growth markets.
Note: The calculation is limited to jurisdictions with at least 50 listed growth companies for which ownership information is available. It is based on holdings weighted by market capitalisation.
Source: OECD Capital Market Series dataset, LSEG, FactSet, Bloomberg; see Annex for details.
Contrary to what the significant stakes of strategic owners and corporations in growth markets could suggest, free float levels in these markets do not differ much from those on main markets (Figure 3.3). Moreover, stock exchanges often set lower minimum free float requirements to list on growth markets than on main markets. According to the OECD Survey, around one‑third of jurisdictions have established lower minimum free float requirements for their growth markets than for their main markets, while Bulgaria, Chile and the United Kingdom have no minimum free float requirements at all.
The free float levels of companies listed on growth markets also vary significantly across jurisdictions. Canada’s growth market has the highest median free float level at 82%, followed by the United States at 80% and Denmark at 70%. Markets with higher free float ratios are more attractive to investors and are expected to develop faster. Some markets have much lower free float levels, such as Indonesia and Romania at 20%, Singapore at 22% and India at 24%. Low free float levels could negatively affect secondary market liquidity, making it more challenging for investors to trade shares efficiently (Ding, Ni and Zhong, 2016[42]). Indeed, over half of the surveyed jurisdictions indicate that low liquidity is one of the main barriers to the further development of growth markets.
Note: Free float level represents the median in each jurisdiction.
Source: OECD Capital Market Series dataset, LSEG; see Annex for details.
Growth companies are typically associated with higher investment risks, in some cases leading to restrictions on retail investor participation. The OECD Survey shows that while the majority of jurisdictions allow retail investors to invest in companies listed on growth markets, six (Chile, China, Japan, Korea, Malaysia and Thailand) have introduced restrictions on retail investors or restricted markets to qualified investors, to mitigate potential risks. In Chile, the ScaleX growth market is only open to qualified investors. Retail investors can obtain this status if they have a significant trading history or meet a certain asset threshold. In China, retail investors must have a minimum account balance of RMB 0.5 million (~USD 68 800) to invest in the Shanghai STAR market and RMB 100 000 (~USD 13 760) for the Shenzhen ChiNext market, as well as at least two years of trading experience. In Asia, some second‑tier growth markets such as the Tokyo Stock Exchange’s Growth Market, Korea’s KOSDAQ, Malaysia’s ACE Market and Thailand’s MAI Market are open to all retail investors. However, access to third‑tier markets in these jurisdictions is restricted to qualified investors or retail investors with a minimum account balance.
To encourage investment in high‑growth companies, many jurisdictions have set up government‑led investment funds that focus specifically on growth companies. According to the OECD Survey, half of the jurisdictions have established funds to support this strategic objective (Figure 3.4, Panel A). Unlike private investment funds, which often prioritise short‑term gains, government‑led funds typically take a long‑term investment horizon. This longer‑term perspective not only provides stable and patient capital for growth companies, but also acts as a catalyst to attract additional investors, instilling confidence in the market. In Germany, for example, the government has established the High‑Tech Gründerfonds (HTGF), which invests directly in start‑ups developing innovative technologies and business models. Since its inception, the HTGF has supported more than 700 companies, fostering innovation and entrepreneurship. Similarly, in China, the SME Development Fund was established to support small and high‑growth enterprises. Operated as a fund of funds, its primary objective is to promote the growth of SMEs in various sectors by leveraging both public and private capital to support the development of promising companies.
In addition to government‑led initiatives, private investment funds have played a crucial role in financing high‑growth enterprises. Almost three-quarters of jurisdictions have reported the presence of private investment funds dedicated to this segment, highlighting the increasing involvement of private capital in supporting growth companies. For instance, in Korea, retail investors who do not meet the required asset threshold are generally restricted from directly investing in KONEX‑listed companies. However, they are encouraged to participate in this market indirectly through investment funds, which provide access to KONEX‑listed securities while offering diversified risk management.
Source: OECD Survey on Equity Markets for Growth Companies, see Annex for more details.
Regulatory frameworks have also been put in place to facilitate the allocation of capital to this segment. In the European Union, investment funds focusing on high‑growth companies operate mainly under two main regulatory structures: the European Venture Capital Funds (EUVECA) and the European Long‑Term Investment Funds (ELTIF). These frameworks provide structured investment vehicles, while also offering tax incentives in certain EU countries, making them more attractive to institutional and private investors. The EUVECA framework mandates that at least 70% of a fund’s capital be allocated to eligible unlisted SMEs, whereas the ELTIF framework, although not exclusively focused on SMEs, allows investment in both listed and unlisted SMEs.
In addition to investment funds, insurance companies and pension funds play an important role in public equity markets. According to the OECD Survey, no surveyed jurisdiction completely prohibits insurance companies or pension funds from investing in growth company stocks. However, direct investment in growth companies is generally uncommon due to liquidity constraints and risk considerations. In most cases, restrictions on such investments are linked to the investment vehicles used. With regard to insurance corporations, 18 jurisdictions report that there are no restrictions on investment in growth company shares, while 8 jurisdictions report restrictions (Figure 3.4, Panel B).
Insurance companies are typically subject to capital regulations that require them to hold capital in proportion to the risk of their equity holdings. In the EU, under Solvency II, insurers must apply a 39% shock in value for listed equities in developed markets and around 49% for riskier equities such as those in emerging markets or unlisted stocks (EIOPA, 2025[43]). In the United States, the Risk-Based Capital system applies a uniform capital charge of 15% for ordinary listed equities. Investments in newly listed growth companies, small-cap stocks or emerging market equities tend to face conservative treatment both in regulatory frameworks and in practice (NAIC, 2012[44]). Even in the United States, where there is no explicit regulatory “growth stock” category, such assets are often internally treated as high-risk due to factors such as low credit ratings or poor liquidity, leading insurers to adopt a cautious investment approach.
Similarly, for pension funds, 19 jurisdictions reported no restrictions to invest in growth company stocks, while 7 jurisdictions reported restrictions. Pension funds typically prioritise safer investments to ensure the financial security of their beneficiaries. For instance, in Korea, pension funds were historically restricted from directly investing in unlisted growth companies and were only allowed to invest in growth companies listed on the KOSDAQ market. However, in 2024, a new long‑term asset allocation framework was introduced, allowing pension funds to allocate capital to unlisted growth companies for the first time. Pension funds also face restrictions on the investment vehicles that can be used to invest in growth companies. In Thailand, for example, pension funds can only invest up to 1% of their total assets in private equity.
Market makers are crucial in providing liquidity, which is particularly important for smaller companies with lower trading volumes. By facilitating smoother transactions, market makers help enter or exit positions more easily, thus reducing price volatility and enhancing market efficiency. According to the OECD Survey, 13 jurisdictions have adopted market maker regimes to promote the liquidity of growth company stocks. These regimes operate within a structured regulatory framework established by the stock exchange or the regulatory authority, requiring market makers to provide continuous liquidity by placing buy and sell orders for designated securities within set spreads and volumes, as well as reporting their activities. In addition to regulated market makers, voluntary or independent ones can also play a key role in providing liquidity. They are not bound by specific exchange or regulatory rules, and typically receive no formal incentives.
Most jurisdictions have established regulatory frameworks to govern market making activities. These frameworks typically impose specific obligations on market making companies, particularly in relation to liquidity provision, transparency and risk management. Often, market making regulations apply equally to both main and growth markets. In the European Union, for example, market making firms are generally subject to MiFID II, which applies to both regulated markets and MTFs. Under this regime, market making firms must enter into a binding written agreement with the trading venue. This agreement sets out their obligations, including the requirement to maintain continuous bid and offer quotes for specified financial instruments to enhance market liquidity. However, some jurisdictions have introduced specific regulatory frameworks for market makers operating in different growth markets. In China, for example, the CSRC has established specific regulations for market making activities in the second‑tier market, STAR segment of the Shanghai Stock Exchange, and another regulation with even more flexible requirements for the third‑tier market, the Beijing Stock Exchange (CSRC, 2022[45]; CSRC, 2023[46]).
The OECD Survey shows that China, Croatia, Italy, Korea, Mexico, Romania, Singapore, Sweden and Chinese Taipei regulate market makers on their growth markets. In contrast, Brazil, Bulgaria, Colombia, France and Portugal rely solely on voluntary market makers (Figure 3.5). Meanwhile, Canada, Greece, India, Spain and the United Kingdom have both regulated and voluntary market makers on growth markets. Importantly, all jurisdictions where they operate assess the activity of market makers as either active or very active, which highlights their important role in supporting secondary market liquidity.
Source: OECD Survey on Equity Markets for Growth Companies, see Annex for more details.
In some jurisdictions, the market maker framework is set up only for specific financial instruments. For instance, Australia, despite not having market makers for equity trading, requires designated market makers for ETF products and funds. Similarly, the Tokyo Stock Exchange has implemented a market maker regime exclusively for ETFs. This focus is partly driven by the campaign to diversify household investments. Since the start of this framework in 2018, the Tokyo Stock Exchange has appointed 11 market makers (JPX, 2024[47]) .
Exchanges often offer financial incentives to encourage market makers to provide liquidity. These incentives typically include fee rebates, reduced transaction costs or direct monetary compensation based on trading activity and liquidity provision. For example, Euronext has introduced the Liquidity Provider Programme that operates independently of MiFID II requirements. Under this programme, market makers can qualify for a full waiver of trading fees for their liquidity provision activities, provided they meet certain performance criteria, such as maintaining continuous quotes for at least 80% of the trading hours in a calendar month (Euronext, 2024[48]). Similarly, the Singapore Exchange has the Market Maker and Active Trader Programmes to increase secondary market liquidity. Both receive clearing fee rebates as incentives, with market makers evaluated on quotation quality and active traders on their daily average trading volume (SGX, 2024[49]). The Korea Exchange implemented a market maker scheme and significantly expanded it in 2018 by increasing the number of covered stocks from 82 to 500 (Business Korea, 2019[50]). To encourage the trading of less liquid stocks, the rebates for market makers are set higher for stocks with low liquidity (FSC, 2020[51]).
Some exchanges have taken additional steps to ensure that all listed growth companies benefit from designated market makers to improve liquidity and trading efficiency. In Canada, for example, the CSE ensures that each listed security is assigned a market maker through its Market Maker Program. This initiative ensures that even less liquid stocks receive consistent trading activity. In addition, the CSE has introduced a Guaranteed Minimum Fill (GMF) facility, a mechanism designed to ensure that investors can execute trades even when the order book liquidity is insufficient. Market makers assigned to each stock are required to support the GMF facility, providing additional liquidity and ensuring smoother trade execution for investors.
However, trading of listed growth companies, particularly smaller ones, tend to be highly volatile, increasing the risk for market makers to provide liquidity to these companies. As a result, some exchanges have excluded smaller growth companies from market making programmes to mitigate the risks. For example, Bursa Malaysia’s Pilot Market Making Programme for Eligible Stocks, introduced in June 2021, restricts participation to medium and large companies - specifically those with a market capitalisation exceeding RM 500 million (~USD 112 million) that face liquidity challenges (Bursa Malaysia, 2024[52]).
Research coverage plays a crucial role in enhancing transparency and accessibility of information on growth companies, which have less accessible information compared to larger companies. Indeed, by providing deeper insights into a company’s performance, prospects and risks, research coverage helps to reduce information asymmetries, making it easier for investors to make informed decisions. This increased transparency can help attract a wider range of market participants, leading to higher trading volumes and improved liquidity, which can ultimately lead to more accurate pricing of the company’s shares (Dang, 2019[53]). According to the OECD Survey, more than half of the surveyed jurisdictions report that investors face challenges in accessing research on growth companies, with 54% indicating a lack of available research and 8% that it is costly for investors to obtain it (Figure 3.6). Meanwhile, around half of the jurisdictions report that the service is generally available at a reasonable cost or free of charge.
Source: OECD Survey on Equity Markets for Growth Companies, see Annex for more details.
To support the research coverage of growth companies, measures have also been put in place to reduce costs. According to the OECD Survey, in six jurisdictions (Australia, Korea, Malaysia, Romania, Singapore and Spain), support or subsidies are in place to increase research coverage for growth companies. This can include financial support for brokers or research firms, as well as stock exchange-led initiatives that provide research at no cost or at a reduced price.
Stock exchanges often take initiatives in providing research coverage to growth companies. For example, the Australian Securities Exchange established the Equity Research Scheme to support independent research on smaller listed companies. In Spain, the BME, in collaboration with the Instituto Español de Analistas, launched the Lighthouse project to provide fundamental analysis on Spanish listed companies that lack research coverage. Similarly, in Romania, the Bucharest Stock Exchange operates the BVB Research Hub, which supports equity research for listed companies, including growth companies.
In other cases, subsidies are provided either by stock exchanges or regulators to brokers or research houses that conduct research on growth companies. For instance, Bursa Malaysia launched the Bursa Research Incentive Scheme aimed at expanding research coverage (Bursa Malaysia, 2024[54]; The EDGE Malaysia, 2022[55]). Similarly, the Monetary Authority of Singapore supports research houses through the Grant for Equity Market Singapore Scheme. Under this scheme, Singapore Exchange (SGX) works with research houses to support and enhance the research coverage of listed companies. This includes encouraging the employment of research talents and preparation of quality research reports, which are publicly available on the SGX website at no cost (MAS, 2021[56]).
In Europe, the research unbundling rule, introduced by MiFID II in 2018, led to a decline in investment research as portfolio managers need to pay separately for the research they obtain rather than receiving it as a part of bundled services, which particularly affected smaller companies. In 2024, the EU Listing Act removed the market capitalisation threshold for companies for which bundled payments for research was allowed. The change aimed at revitalising the market for investment research, in particular for smaller companies. Moreover, the European Securities and Markets Authority (ESMA) introduced a “code of conduct for issuer‑sponsored research” as part of the EU Listing Act. The code provides a framework to ensure that sponsored research is independent, objective and credible. Moreover, sponsored research that meets the standard set by ESMA will be publicly available via the European Single Access Point.