This new report offers policy recommendations to Portuguese authorities on how to improve the conditions for capital markets to finance corporations of all sizes and provide investment opportunities to savers.

1. OECD Capital Market Review of Portugal 2020
Mobilising Portuguese Capital Markets
for Investment and Growth
Lisbon, 2 October 2020

2. Source: OECD Capital Market Review of Portugal 2020.
Portugal entered the COVID-19 crisis with undersized capital markets
While Portugal represents 1.3% of the EU GDP,
• total stock market capitalisation represents only 0.6% of the stock market
capitalisation in the EU, and
• non-financial company IPOs and corporate bond issuances correspond to
around 0.01% and 0.16% of the total EU amounts.
0.7
0.1
0.2
0.0
0.6
1.3
0.0 0.2 0.4 0.6 0.8 1.0 1.2 1.4
Private equity investment
Private equity fundraising
Non-financial corporate bond
issuance
Non-financial company IPOs
Stock market capitalisation
GDP
EUR millions
203 896
Portugal's share in EU... (2018)
54 306
1.5
537
105
532
0.01
Per cent

3. Source: OECD Capital Market Review of Portugal 2020.
Decreasing number of listed companies and
low free-float levels in the Portuguese public equity market
Listed and delisted Portuguese companies Free-float level and market capitalisation
• By the end of 2019, 47 companies were listed on Euronext Lisbon.
• Over the past two decades, only in 2008 did the number of new listings
surpassed the number of delistings.
• In addition to the low market capitalisation in the Portuguese stock market,
the number of shares available for trade is also low.
30%
40%
50%
60%
70%
80%
90%
0
200
400
600
800
1 000
Portugal Belgium Netherlands France
Market capitalisation Free-float ratio (RHS)
2018 EUR, billions
-20
-15
-10
-5
0
5
2000 '02 '04 '06 '08 '10 '12 '14 '16 '18
Delisted companies New listings Net listings
No. of companies
2 220

4. Source: OECD Capital Market Review of Portugal 2020.
External equity and debt securities are not important
sources of financing for Portuguese companies
According to the OECD Survey on Access to Finance in Portugal:
• Internal funds is the most important source of financing for 85% of the
companies, followed by bank loans and credit lines.
• Debt securities and external equity are important funding sources for less
than 30% of the companies.
The importance of different funding sources
35%
14%
85%
28%
67%
52%
42%
41%
28%
0% 10% 20% 30% 40% 50% 60% 70% 80% 90%
Subsidies
Other(s)
Internal funds
External equity
Bank loans
Credit line
Trade credit
Leasing
Debt securitiesOthersEquityDebt

5. Source: OECD Capital Market Review of Portugal 2020.
Key factors for creating a successful stock exchange listing
environment for Portuguese unlisted companies
Key market and related cost factors Key regulatory factors
• The OECD Survey of 300 Portuguese companies sheds light on the
perspectives and priorities of Portuguese unlisted companies in developing a
successful stock exchange listing environment.
Increased retail inv. participation
Awareness programmes for companies
Analyst coverage / market research
Increased institutional inv. participation
Tax incentives for investors
Affordable advisory services
Better support for market liquidity
Tax incentives for issuers 83%
81%
80%
79%
74%
56%
67%
67%
Existence of dual class shares
Flexible corporate governance requirements
Framework for alternative listing segments
Simplified listing procedures
Simplified disclosure / compliance 86%
85%
84%
81%
57%

6. Promoting access to equity capital through the stock market
OECD recommendations on five areas
Creating an enabling environment for corporate growth
Facilitating market-based long-term debt financing
Increasing participation of traditional institutional investors
Increasing the use of alternative financing






7.  Promoting access to equity capital through the stock market
1 Encourage both unlisted and already listed companies to issue
equity in the stock market by introducing:
• A listing and supervisory fee system that favours listed companies with
higher free-float ratios;
• A tax credit system related to initial listings and secondary equity offerings
costs, including any advisory service costs, against the corporate income tax
payable up to a certain amount.
2 Provide more flexibility to facilitate listings by:
• Modernising the regulatory framework taking into account the CMVM’s
review of the Securities Code;
• Considering changes to the Companies Code to address concerns about losing
control when listing;
• Engaging in an awareness campaign to inform the companies about the
opportunities for flexibility that already exist and the new initiatives.

8.  Promoting access to equity capital through the stock market (cont.)
3 Support the creation and scaling up of domestic capital market
intermediary and advisory institutions by:
• Providing capital gains tax-exemptions for certain collective investment
vehicles that predominantly invest in the domestic equity market and are
targeted at retail investors;
• Scaling up the domestic underwriting services and market making capacity of
state-owned financial institutions;
• Assigning a domestic institution the function to provide or support market
research on smaller companies.

9.  Creating an enabling environment for corporate growth
1 Evaluate the current corporate tax system to provide incentives for
corporations to expand, focusing in particular on:
• Relatively unfavourable rules related to the amortisation of goodwill that
arises from corporate acquisitions;
• The comparatively high effective statutory corporate tax rates for larger
companies;
• The effectiveness of the progressive marginal corporate tax rates.
2
Support private initiatives to facilitate corporate consolidation, such
as a platform that:
• Makes advanced use of modern fintech developments and helps companies
to interact with investors, service providers and other companies;
• Provides necessary services for M&As such as deal management, due
diligence and post-merger analytics.

10.  Facilitating market-based long-term debt financing
2
Introduce a framework for private bond placements by smaller
companies and create a dedicated segment for listing these bonds
accessible only to qualified investors
1
Develop a strategic plan on improving conditions for the
Portuguese corporate bond market that may consider:
• Creating an appropriate credit rating mechanism, in particular for mid-sized
companies who do not have access to international rating providers;
• Promoting state-owned enterprises’ bond issuance and listing on the
domestic market;
• Establishing an industry body that represents investment banks, bond dealers
and other financial institutions that are active in the Portuguese fixed income
market.

11.  Increasing participation of traditional institutional investors
1
Improve household participation in the Portuguese capital market
through investment funds by introducing:
• A special framework for savings accounts that benefit from tax advantages if
the investment is held for a certain period of time;
• Requirements for specialised funds to allocate a minimum amount of their
assets to securities of smaller companies facilitating long-term financing for
Portuguese SMEs.
2
Increase the coverage and confidence in the private pension
system by:
• Ensuring that one set of tax rules applies to all schemes and types of pension
contributions;
• Tightening the rules for withdrawals from the private plans;
• Supporting the use of occupational pension plans.

12.  Increasing the use of alternative financing
3 Encourage the use of alternative financing by:
• Introducing a regulatory framework for Special Purpose Acquisition Vehicles
(SPACs) that offers a hybrid investment model of private and public markets;
• Promoting the use of ELTIFs to facilitate the participation in private equity
markets.
1
Evaluate the current investment and capital requirement regimes
for traditional institutional investors to boost their participation in
private markets
2
Assess the current framework for qualified individual investors
with a view to facilitate the recognition of eligible retail investors
as qualified investors

13. Thank you for your attention!
This report is part of the OECD Capital Market Series. More information about the
series is available at: http://www.oecd.org/corporate/capital-markets
The project was funded by the European Union via the Structural Reform Support
Programme and implemented by the OECD, in cooperation with the European
Commission’s Directorate General for Structural Reform Support (DG REFORM).