Financial Globalization and the Rise of IPOs Outside the U.S.

62 Pages Posted: 29 Jul 2012 Last revised: 28 Jan 2013

Craig Doidge

University of Toronto - Rotman School of Management

George Andrew Karolyi

Cornell University - Johnson Graduate School of Management

René M. Stulz

Ohio State University (OSU) - Department of Finance; National Bureau of Economic Research (NBER); European Corporate Governance Institute (ECGI)

Date Written: January 25, 2013

Abstract

From 1990 to 2011, the share of the world’s initial public offering (IPO) activity outside the U.S. increased with financial globalization. In the 1990s, when financial globalization was lower, there were 0.37 U.S. IPOs for each non-U.S. IPO compared to only 0.12 in the 2000s. Consistent with theoretical predictions, we find that greater financial globalization is associated with a decrease in the importance of national institutions as determinants of a country’s domestic IPO activity. One reason for this decrease is that greater financial globalization makes it easier for firms going public to access foreign capital markets and use foreign institutions. As a result, a large part of the increase in non-U.S. IPO activity occurred through an increase in global IPOs by both small and large firms. U.S. IPO activity did not benefit from increased financial globalization and, consequently, the U.S. share of world IPOs fell. It did so most dramatically for small-firm IPOs, for which its market share fell from 31% in the 1990s to 5% in the 2000s. Our evidence highlights the role of financial globalization in explaining the drop in the U.S. share but it also suggests that some of the drop is due to U.S.-specific factors.

Keywords: International finance, IPOs, Securities Laws, Corporate governance

JEL Classification: G3, F3

Suggested Citation

Doidge, Craig and Karolyi, George Andrew and Stulz, René M., Financial Globalization and the Rise of IPOs Outside the U.S. (January 25, 2013). Fisher College of Business Working Paper No. 2012-03-013; Rotman School of Management Working Paper No. 2118624. Available at SSRN: https://ssrn.com/abstract=2118624 or http://dx.doi.org/10.2139/ssrn.2118624

Craig Doidge

University of Toronto - Rotman School of Management ( email )

105 St. George Street
Toronto, Ontario M5S 3E6
Canada
416-946-8598 (Phone)

HOME PAGE: http://www.rotman.utoronto.ca/facBios/viewFac.asp?facultyID=craig.doidge

George Andrew Karolyi

Cornell University - Johnson Graduate School of Management ( email )

Ithaca, NY 14853
United States

Rene M. Stulz (Contact Author)

Ohio State University (OSU) - Department of Finance ( email )

2100 Neil Avenue
Columbus, OH 43210-1144
United States

HOME PAGE: http://www.cob.ohio-state.edu/fin/faculty/stulz

National Bureau of Economic Research (NBER)

1050 Massachusetts Avenue
Cambridge, MA 02138
United States

European Corporate Governance Institute (ECGI)

c/o ECARES ULB CP 114
B-1050 Brussels
Belgium

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