University of Birmingham research wins prestigious Financial Conduct Authority award

The University of Birmingham has been named as one of the six institutions to receive a prestigious award in the Financial Conduct Authority’s (FCA) inaugural Economic Research Competition.

The award recognises innovative research that contributes to a more inclusive and informed debate around UK economic growth, competitiveness, and financial regulation.

The competition, launched in November 2024, attracted 43 entries from 41 organisations, including academics, think tanks and consultancies.

Dr Eilnaz Kashefi Pour, Associate Professor and Deputy Head of the Department of Finance, led the University of Birmingham’s winning project. Receiving £30,000 to fund a three-month long project to support the vital role of regulation in the financial services sector, Dr Kashefi Pour explored the financial needs and survival prospects of newly listed firms on the London Stock Exchange, comparing the Alternative Investment Market (AIM) with the Main Market.

Dr Kashefi Pour, said: “I am delighted to receive this award and excited by the opportunity to contribute to research that can help shape the future of the UK’s financial services sector.”

Professor Edgar Meyer, Dean of Birmingham Business School added: “We are thrilled to see this well-deserved recognition of Dr Kashefi Pour’s innovative research. Her exemplary work is sure to drive future changes and conversation, and we are proud to celebrate this achievement.”

The research looks at what happens to companies after they go public on the London Stock Exchange, especially on the Alternative Investment Market, AIM (which is designed for smaller, fast-growing firms) and the Main Market (for more established companies). The study shows that many newly listed companies struggle to survive in the years following their IPO (Initial Public Offering, the process when a private company sells its shares to the public for the first time by listing on a stock exchange). While Main Market firms are generally more established and enjoy greater stability, those that are smaller or closely held by insiders (where a small group controls most of the shares) are more vulnerable to delisting. In contrast, firms with stronger financials and broader investor appeal tend to survive longer.

The research revealed that many firms are more likely to leave the stock market, not necessarily because they’ve failed as businesses, but because they can’t raise more money after listing. These firms often rely on external finance to grow, and when access to follow-on funding, known as Seasoned Equity Offerings (SEOs), is limited, their long-term survival is at risk. Less profitable firms tend to raise equity sooner, reflecting a need to cover funding shortfalls, while more profitable firms delay equity issuance, relying on internal cash flow instead. Firms with high growth demands are more likely to issue SEOs earlier, particularly in AIM. However, companies with high insider ownership are slower to raise additional equity, which may further restrict their ability to scale.

The study also shows that economic conditions matter. When the economy is growing and interest rates are low, companies have a better chance of surviving and raising money. AIM firms, in particular, are more sensitive to these broader financial conditions.

These findings suggest that the biggest challenge for many listed companies is not listing itself but surviving and growing after listing. Without the ability to raise more money, many firms run into difficulties and eventually delist.

Dr Kashefi Pour cautions that the study does not yet reflect the impact of the FCA’s 2024 reforms, and further research will be needed to assess their long-term effects on UK listed firms.

The study recommends several policy interventions, including:

• Considering co-investment schemes to encourage long-term investment from pension funds, insurance companies, or sovereign wealth funds in newly listed firms.
• A requirement for listed firms to disclose their capital runway to help investors assess future funding prospects.
• IPO readiness certification programmes to prepare firms for the demands of public markets.

Dr Kashefi Pour added: “The research shows that AIM plays a vital role in supporting innovation and entrepreneurship, but its firms are more exposed to economic uncertainty, in comparison to firms in the Main Market. As the UK seeks to boost growth and global competitiveness, it’s essential that regulations evolve to support these firms, through better access to capital, structured readiness programmes, and enhanced transparency.”

The FCA launched the funding competition to produce fresh insights into some of the most pressing challenges and opportunities facing the UK’s financial industry, and to help to shape and drive a more informed and inclusive debate around economic growth.

On the awards, Kate Collyer, the FCA’s chief economist, said: “We’re delighted to receive such innovative research proposals which will help us better understand how regulation can enable growth. We look forward to working with participants to drive meaningful change.”