Filling the Gap: How Georgian Firms and Policy Programs Respond to a Thin Domestic Capital Market

Abstract

Relevance: Institutional voids theory holds that firms in emerging and transition economies must compensate for missing or underdeveloped market-supporting institutions, with capital market depth being one of the most consequential such institutions for firm financing and growth. Although this theory has been extensively applied to large emerging economies, it has not previously been applied to Georgia, a small, open, transition economy whose capital market remains comparatively thin despite recent growth. Purpose: This paper examines how Georgian firms and a specific government program have responded strategically to the documented shallowness of the domestic capital market. Methods: The paper applies institutional voids theory and related international business literature on firm-level institutional strategies to a structured documentary analysis of verified financial market data, drawing on data from the World Bank, the National Bank of Georgia, and Georgian financial market reporting. Results: the analysis documents a persistent reliance on foreign-currency and bank-centred financing among the largest Georgian corporates, the listing of Georgia's largest and most internationally recognised firms on the London Stock Exchange rather than the domestic exchange, and a targeted government bond-support programme, the Enterprise Georgia Capital Market Support Programme, introduced specifically to help small and medium-sized enterprises access bond financing that the market would not otherwise readily provide. Despite recorded growth in the domestic corporate bond market between 2018 and 2025, market participants and regulators continue to describe the market as shallow by international standards. Practical value: the paper provides Georgian managers with an evidence-based account of why local and foreign-currency bank financing, internationally listed equity, and targeted public bond-support programs have each emerged as practical responses to capital market depth constraints, and offers policymakers a documented basis for evaluating whether such targeted programs are succeeding in deepening the market over time.