We need large companies, confidence to boost capital market
"We need, and very much so, to have large and very large companies. The feeling one gets is that there is an imaginary line defined by the size of the companies."
The head of Portugal’s Securities Market Commission, Luís Laginha, defended on Tuesday that large companies are needed and therefore an end should be put to the idea that the rational option “seems to be to stay forever” micro, small or medium.
Luís Laginha de Sousa, chairman of the board of the Securities Market Commission (CMVM), was speaking at the opening session of the annual conference of this institution, at the Gulbenkian Foundation in Lisbon, when he defended the importance of “confidence” to boost the capital market.
“We need, and very much so, to have large and very large companies. The feeling one gets is that there is an imaginary line defined by the size of the companies,” he said.
For Luís Laginha de Sousa, “below that line, companies are virtuous because they are micro, small and medium-sized and, above that line, when they become large, companies lose all virtues”.
“It is fundamental to eliminate the bias that makes the rational choice seem to be to remain forever micro, small or medium-sized. This perspective is profoundly wrong because scale is one of the essential elements for competitiveness”, he considered.
The CMVM leader argued that scale allows for specialisation, which in turn allows for an improvement in productivity, which will have consequences in the improvement of remunerations for both capital and labour.
Luís Laginha de Sousa recalled that the proportion of bank loans in the total debt of Portuguese companies at the end of 2022 was 62%, while the proportion of debt securities was 12%.
He argued that “capital has no homeland, but a homeland can attract capital” and that “capital is not in itself negative, contrary to what it is often made to believe”.
“When capital is generated or obtained honestly and used to generate value, create employment, bring better products and services that are more accessible to all, develop cleaner energy, promote more wealth and more access to that wealth, I believe it is difficult to have a negative outlook on it,” he said.
The president of the market regulator also assured that the CMVM is “absolutely dedicated to promoting the protection of investors’ interests” and committed to promoting “greater proximity with investors”.