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World Markets for Raising New Capital

57 Pages Posted: 23 Jan 2004  

Brian J. Henderson

George Washington University - Department of Finance

Narasimhan Jegadeesh

Emory University - Department of Finance

Michael S. Weisbach

Ohio State University (OSU) - Department of Finance; National Bureau of Economic Research (NBER)

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Date Written: January 2004

Abstract

Financial markets are increasingly integrated globally. We examine the extent to which firms from different countries rely on alternative sources of capital, the locations where they raise capital, and the factors that affect these choices. During the 1990-2001 period, firms raised about $25.9 trillion of new capital, including $4.7 trillion from abroad. International debt issuances are substantially more common than equity, accounting for over 90% of the international security issues, and about 20% of all public debt issues. In contrast, international equity issues account for about 4.4% of all international security issues, and about 6% of all equity issues during our sample period. Market timing considerations appear to be very important in security issuance decisions. Firms all around the world are more likely to issue equity prior to periods of low market returns. Most of the cross-border equity is issued in the U.S. and the U.K., and these issues tend to occur in 'hot' markets and prior to relatively low market returns. Finally, firms issue more debt when interest rates are lower, and issue debt overseas when interest rates in the place of issue are lower than they are at home.

Suggested Citation

Henderson, Brian J. and Jegadeesh, Narasimhan and Weisbach, Michael S., World Markets for Raising New Capital (January 2004). NBER Working Paper No. w10225. Available at SSRN: https://ssrn.com/abstract=486229

Brian Joseph Henderson

George Washington University - Department of Finance ( email )

Department of Finance, Funger Hall
2201 G Street, NW
Washington, DC 20052
United States
202-994-3669 (Phone)

Narasimhan Jegadeesh

Emory University - Department of Finance ( email )

Atlanta, GA 30322-2710
United States

Michael S. Weisbach (Contact Author)

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

2100 Neil Avenue
Columbus, OH 43210-1144
United States

National Bureau of Economic Research (NBER)

1050 Massachusetts Avenue
Cambridge, MA 02138
United States

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