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


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  • Doidge, Craig

    (University of Toronto)

  • Karolyi, George Andrew

    (Cornell University)

  • Stulz, Rene M.

    (OH State University and European Corporate Governance Institute)

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    During the past two decades, the fraction of the world's initial public offerings (IPOs) accounted for by U.S. firms has fallen sharply. This decrease is attributed to higher IPO activity outside the U.S. and lower IPO activity in the U.S. We show that financial globalization has played a major role in the growth of IPOs outside the U.S. Historically, a country's IPO activity was strongly related to the quality of its institutions and better institutions helped explain the higher IPO activity in the U.S. compared to other countries. However, greater financial globalization has been associated with a reduction in the importance of institutions as determinants of a country's IPO activity. A large part of the increase in IPO activity outside the U.S. occurred through global IPOs, IPOs in which some of the proceeds are raised outside the firm's home country. Financial globalization has enabled firms from countries with poorer institutions to make use of global IPOs and they have done so more than firms from other countries. The evidence is consistent with the view that access to global markets and, more generally, financial globalization helps firms overcome the obstacles of poor institutions.

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    Bibliographic Info

    Paper provided by Ohio State University, Charles A. Dice Center for Research in Financial Economics in its series Working Paper Series with number 2012-13.

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    Date of creation: Jul 2012
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    Handle: RePEc:ecl:ohidic:2012-13

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    Cited by:
    1. Karolyi, G. Andrew, 2012. "Corporate governance, agency problems and international cross-listings: A defense of the bonding hypothesis," Emerging Markets Review, Elsevier, Elsevier, vol. 13(4), pages 516-547.
    2. Loughran, Tim & McDonald, Bill, 2013. "IPO first-day returns, offer price revisions, volatility, and form S-1 language," Journal of Financial Economics, Elsevier, Elsevier, vol. 109(2), pages 307-326.


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