Beyond financial constraints: an institutional entrepreneurial finance model of SME public listings in emerging markets

While specialized stock exchanges for small and medium enterprises have proliferated, firm-level drivers of listing remain weakly theorized, especially in emerging economies. Drawing on pecking order theory, signaling theory, and the resource-based view, this paper develops an institutional entrepreneurial finance model of SME listing decisions. The framework addresses when financially constrained SMEs overcome information asymmetries and adverse selection to access public equity through specialized exchanges. We argue that such exchanges generate institutional arbitrage that revises standard IPO predictions. Listing likelihood depends on the interaction between financial constraints and observable quality signals, with the strongest effects among high-quality constrained firms. Pre-listing governance arrangements function as credible signals that attenuate information asymmetries and improve listing outcomes. SMEs possessing growth options tied to irreversible investments pursue public listings to secure financial flexibility for option exercise. The model extends pecking order theory by showing how institutional innovation reshapes SME financing hierarchies, integrates signaling theory with the resource-based view in a non-large-firm setting, and reframes IPOs as strategic resource acquisition rather than purely financing events. The framework yields implications for entrepreneurial decision-making, SME exchange design, and investor screening in emerging markets.