Primary Securities Markets: Cross Country Findings

Abstract

This paper examines aggregate primary capital market activity in a cross section of emerging market and developed countries. We analyze data on the value of funds raised domestically via issues of debt and equity securities in public capital markets in 32 countries over the period 1980-95. There was a dramatic increase in the level of activity over that time, as well as substantial differences in the level of activity across markets and countries. We employ a number of market attributes to explain cross-sectional and time series behavior of equity markets, including cost of capital, liquidity, level of market development, informational requirements and investor protection. Some of those have significant explanatory power in a bivariate analysis, but in a multivariate framework only market depth and accounting standards are significant in explaining equity issuance activity. Notably, we find that domestic debt issuance was closely linked to international debt issuance, whereas no such link existed in the equity markets.

JEL Classification: G12, O16