9.amalendu bhunia's rjfa 98 127

Research Journal of Finance and Accounting www.iiste.org
ISSN 2222-1697 (Paper) ISSN 2222-2847 (Online)
Vol 2, No 4, 2011

AN EMPIRICAL ANALYSIS OF GLOBAL AND DOMESTIC
IPO ACTIVITIES IN SELECTED COUNTRIES BEFORE
AND AFTER THE FINANCIAL CRISIS
Malayendu Saha
Professor, Department of Commerce
University of Calcutta
87/1, College Street, Calcutta-700073
West Bengal, India
m_saha2@rediffmail.com

Amalendu Bhunia
Reader, Department of Commerce
Fakir Chand College, Diamond Harbour
South 24-Parganas – 743331
West Bengal, India
bhunia.amalendu@gmail.com

Abstract
The financial crisis in the world over the past years has taken a heavy toll not only on most of the global
economies, but relentlessly impinges on the financial markets as well. This has affected the globalized
banking system to an abrupt collapse and led the worldwide initial public offer (IPO) activity to plummet.
However, the landscape has been transforming since the later part of 2009 with the emerging markets
dominated the proceedings both by value and in volume. Momentum has also been building rapidly in the
revival of global economy as the Governments are taking steady initiatives to mitigate those damages and
shield themselves from the next crisis. The paper aspires to make a comprehensive look at the global IPO
market during the pre and post financial crisis period.
Keywords: Global IPO activity, global financial crisis, domestic IPO activity, macro-economic variables

1. Introduction
A considerable amount of fund raising by the corporate entities mostly comes either from internal sources,
such as retained earnings or through external capital comprising bank credits, equity markets, corporate
bond markets, external commercial borrowings, foreign direct investments and private equity. Facing the
combined burden of an economic recession and plunging capital market, many of the sources of
firm-financing have dried up and slowed down corporate investment and growth. The crisis has not only
taken a heavy toll on most of the economies in the world but severely affected the developed markets with
traditionally strong resources contingent, plunged in valuations in the mining and metal sectors, constrained
credits and made abrupt collapse of the globalized banking system leading to worldwide initial public
offerings (IPO) activity to plummet by more than half. Moreover, shaky economic fundamentals, negative
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investor sentiment and the volatility in equity markets have also acted as the major impediments to the
performance of global IPO market. Investor’s appetite for investment and companies’ willingness to list
have sternly undermined and impacted the global markets. Indeed, a newer literature, which includes
Shleifer and Wolfenzon (2002), Doidge, Karolyi, and Stulz (2007), and Stulz (2009) addresses the impact
of financial globalization on IPO activity and suggests that home country laws and governance institutions
may have opposite effects on domestic compared to global IPOs. The IPO landscape, however, has
significantly transformed during the fourth quarter of 2009-10 with the emerging markets dominated the
proceedings both by value and in volume. The volume of issues has increased steadily and grew in
momentum throughout the year supported by reinforced market fundamentals. Improvement has also seen
building rapidly in the global economy with the manufacturing sector started replenishing; the service
sector has underway escalating performance and a faster recovery of international trade and finance. But
the panorama remains uneven and evidence is mounting of a multi-speed recovery. In this paper attempts
are made to have a comprehensive look at the global IPO market during the pre- and post-financial crisis
period.
1.1 The Genesis of the Crisis
The financial crisis is assumed to be the consequence of (i) monetary policy implemented by Fed
Reserve and (ii) growing global imbalances. The monetary policy, during the tenure of Allan Greenspan as
its Chairman, fashioned a general impression that the interest on capital in a free market economy could
never be at risk and that encouraged the use of high leverage as a source of sustainable high profits from
bubbles. Fed’s monetary policy, as such, was responsible for two most unpleasant outcomes – speculation
and leverage – which, in turn, induced the potential for a severe financial crisis. Moreover, the safe heaven
appeal of the US dollar, as the key international currency and the assured high return on financial
investment in the US capital market, led to a situation where the country maintained continually large and
growing unsustainable current account deficits. In such a situation, countries with current account surpluses
or large foreign exchange reserves kept investing in the US markets resulting imbalances and ending up
with crisis. In addition, the deterioration in credit standards facilitated by sustained easy monetary policy
and deregulation encouraged opportunity for shifting of credit risk through securitization and contributing
to the growth in credit to sub-prime segments. Earlier, it was quite difficult to securitize any type of loan,
like sub-prime loans, and create a market for them. The financial engineers of the Wall Street, however,
found the answer by two means: first by converting the pool of difficult to market loans into sub-prime
residential mortgage-backed securities (MBSs) and collateralised debt obligations (CDOs), and second, by
creating market for different tranches based on ‘ratings’. As the prices of toxic papers witnessed free fall,
losses for the banks having exposure to such papers rose significantly, and the capital buffer turned
increasingly inadequate, creating concerns for insolvency. Moreover, as the risk taking ability of these
banks eroded, the flow of money for financing real activities became difficult resulting stress on capital.
This was observed both in money market and credit market in the advanced economies. The real economic
activity started decelerating as aggregate demand, particularly private consumption and investment
opportunities shrank under the pressure of deleveraging, wealth loss associated with falling asset prices,
rising unemployment, and deteriorating climate for investment and employment. In view of the adverse
feedback in the advanced economies, policies were initiated by the respective governments aiming to
address both financial trauma and economic downturn.
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1.2 Objectives
The main objectives of the present work are to make a study about global IPO market during the pre-
and post-financial crisis period. More specifically, it seeks to dwell upon mainly the following issues:
1. To view on the global IPO markets with top five country-level IPO markets during the pre- and
post-financial crisis period;
2. To assess the global IPO activities during the pre- and post-financial crisis period;
3. To explore the relationship between global IPO activities and domestic IPO activities;
4. To examine the association of country-level macro-economic variables with global IPO activities.
1.3 Hypotheses
Keeping the above objectives in mind, the following null and alternative hypotheses have been
formulated and tested during the study period:
Hypothesis 1
H0: When global IPO markets increases, country-level IPO market remains same;
H1: When global IPO markets increases, country-level IPO markets also increases.
Hypothesis 2
H0: There is no relationship between global IPO activities and the IPO activities of the
domestic institutions;
H1: There is a significant relationship between global IPO activities and the IPO activities of
the domestic institutions.
2. The Impact of the Crisis on Global IPO Market
Though the global IPO market earlier had the harsh experience of weathering the 1987 market crash,
the Russian debt implosion, the internet bubble bursting and the 9/11 episode, but the market proved to be
remarkably hard-wearing in the current episode during the recent times. The unprecedented financial crisis
affected the global IPO issuance to come to a near halt during mid-2008. The overall drop in issuance was
huge, with global proceeds falling 69% year-over-year, and the most established IPO markets, the US and
Europe, were affected particularly hard. However, as assets being devalued globally, no IPO market was
insulated from the financial crisis. Almost all countries saw a substantial drop in quantum of deals and
fundraising, including the IPO powerhouses, such as BRIC countries (Brazil, Russia, India and China). In
2008, the BRIC countries together hosted 163 deals worth US$28 billion, a 62% drop in deal numbers and
a 76% decline in funds raised from 2007. Emerging markets, on the other, appeared to be relatively immune
to developed market economic meltdown. However, by the end of 2008, decoupling theories were
thoroughly debunked as emerging markets suffered a severe loss in asset values, liquidity and investor
confidence, just as in the developed markets.
During 2008, a total of 769 IPOs worldwide raised US$ 96 billion, representing a 61% drop in deal
numbers and a 67% decline in capital raised from 2007. The year experienced the lowest number of IPOs
since at least 1995 and since 2003 for capital raised. Faced with the lowest market valuations since the
1980s, a record number of prospective IPOs were withdrawn or postponed. By stark contrast, in 2007, the
global IPO activity had soared to an all-time high with 2,014 deals and US$ 295 billion in capital raised. In
2009, IPO markets continued to stagnate as volatile markets made it difficult to price and execute deals and
globally, a total of 51 IPOs in a wide range of sectors raised a mere US$1.4 billion. The largest offering for
the quarter was the US$828 million carve-out IPO of Mead Johnson Nutrition Co. on the New York Stock
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Exchange (NYSE). However, in 2010, the IPO activity bounced back heavily throughout the world with
proceeds of US$ 285 billion comprising 1,398 IPO deals.
Insert Fig. 1 here
In the face of weakening economic fundamentals and the subprime crisis, the US saw 31 IPOs worth
US$ 25.9 billion, an 82% fall in deal numbers and 24% decrease in funds raised from the previous year.
Even so, in 2008, the US was the fundraising leader with 27% of the total global capital raised — this was
primarily due to the massive Visa deal, which by itself, made up 21% of global fundraising. Latin American
markets also ground to a halt in response to the global credit crunch, falling commodity prices and rising
interest rates. In 2008, the region saw just 10 IPOs together worth US$ 7.3 billion – estimating around 89%
plunge in deal numbers and 81% decline in funds raised from the previous year. Regionally, Latin America
made up 8% of global IPO funds raised in 2008, compared 13% in 2007. Europe, grappled with bleak
earnings outlooks, sinking stock markets and looming recession, generated just 168 deals worth US$ 13.6
billion, representing a 67% decrease in deal numbers and an 85% drop in funds raised from 2007. As a
region, the country accounted for 14% of global IPO fundraising, compared with a 32% share in 2007.
Threatened by the global banking crisis, oil price fluctuations, exchange rate devaluations and accelerating
inflation, Russia saw only two deals worth US$ 1 billion — a collapse of 90% in deal numbers and 95% in
funds collected during 2007. Chinese IPOs were sustained by a still fast growing economy and
infrastructural privatizations. In 2008, Greater China retained its lead globally in IPO deal numbers and
came in second only to the US in fundraising, with 127 deals worth a total of US$ 17.9 billion, a 51% drop
in deal numbers and a 73% decline in funds raised from 2007. In India, the widening financial crisis helped
trigger high volatility in the stock markets. During 2008, only 40 IPOs raised US$ 4.8 billion, representing
a 62% drop in number of deals and 45% decline in funds raised as compared with 2007. India’s leading
energy company, Reliance Power was the fourth largest IPO, raising US$ 3.0 billion on the Bombay Stock
Exchange, but now traded far below its offer price. In the first half of 2008, the Middle East, particularly
Saudi Arabia, emerged as a major player in the global IPO market. Shored up by vast liquidity, soaring oil
prices, infrastructural development and privatizations, the Middle East yielded 51 IPOs worth US$ 13.2
billion, representing 17% of global capital raised (compared with 7% in 2007).
Although all industries contributed to 2008 global IPO activity, the top three sectors accounted for
63% of total fundraising: financial services (US$ 26.0 billion), energy and power (US$ 18.3 billion) and
materials (US$ 16.0 billion). By number of deals, the leading sectors for IPOs were materials (185
offerings), industrials (108) and technology (84). The risk-averse investors, with all sectors down,
discounted heavily on high-growth companies. In terms of funds raised, real estate, healthcare and
technology industries declined the most, generating just US$ 1.8 billion (down 94% from 2007), US$ 1.1
billion (down 89%) and US$ 1.9 billion (down 88%) respectively (World IPO Report, 2011).
2.1 The Pre- and Post-crisis Global IPO market
The global IPO market during 2001-03 was extremely challenging. It took about two or three quarters
before the IPO market came back strongly. However, the impact of the present crisis was most severe and
widely extended than the Great Depression. Though massive capital was allocated to equities, still there
were lot of capital being invested to new ventures on the follow-on front. IPOs came back slowly initially
with activities accelerated during the last quarter of 2009 and deal flow was mostly dominated by mature
companies, including a large number of private equity-backed firms. Though performance was not so
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encouraging, this, however, represented a natural progression in the recovery of IPO market with buyers
negotiating hard on price amidst a saturation of leveraged buyouts (LBO) offerings. The financial sponsors,
on the other, were not in favour of the current equity valuations, and viewed the IPO market as the best
available source of capital or liquidity.
The revival of the global IPO market, however, showed unevenness. Major disparities were observed
both in quality and business of IPOs originating from the dominant global players like US and China. The
US-based IPOs were led by LBOs and mortgage REITs, in contrast to the Chinese IPOs which raised
money to pour into her domestic infrastructure, its nascent pharmaceutical industry, and other
consumer-oriented enterprises. In short, while the US IPO market activity was largely geared to healing the
excesses of overleveraging in private equity and real estate, the Chinese IPOs were mostly directed towards
economic growth. PE-backed IPOs made a comeback (US $35 billion raised in 155 deals), particularly in
the US and Europe. The amount was more than double the US $16.8 billion raised in 2009, and almost
three times what sponsors rose in the trough of the recession in 2008. Nonetheless, activity is still behind
the peak of the cycle, when PE firms raised more than US $58 billion taking companies public in 2007. On
average PE-backed IPOs returned 27.2% in 2010. Performance of new issues during 2009 was much
improved over 2008, although less impressive than historical standards. Early in the year, performance was
very strong as growing companies with attractive valuations were taken public. However, during the later
part, performance weakened because of a wave of private equity IPOs with more aggressive valuations and
riskier companies taking advantage of the widening window of opportunity for IPOs. Asian issuers,
particularly China and Hong Kong, continued to lead IPO activity in a five-year trend begun in 2006. Asia
raised the most IPO capital on record, making up almost 65% of the global proceeds (US $183.9 billion,
789 deals). Greater China achieved record high for fund-raising during 2010, accounting for 46% of global
funds raised – (US $131.8 billion in 509 deals) – a huge 165% increase from 2009. The recovery of global
IPO activity was most pronounced in the Hong Kong and Shanghai markets. Those two exchanges together
raised $54 billion, which accounted for 51% of total global proceeds after the Chinese government ended a
nine-month IPO freeze on the Shanghai exchange, leading to a slew of companies going public that had
been waiting to raise capital for nearly a year or more. In global regions beyond the US and Asia, the
recovery was less pronounced in Europe where the IPO proceeds fell significantly from 2008. However, the
continent still produced $6 billion in fourth quarter, compared with under $500 million for the first nine
months, which reflected that Europe’s IPO markets had begun to recover. By the end of 2010, IPOs on
European exchanges raised the highest volume since 2007 (US $36.7 billion in 252 deals), a huge 395%
increase in fund-raising from 2009. The only other region to see a significant decline in IPO activity was
the Middle East and Africa, which saw a continuation of the 2008 declines as risk appetite dried up for
frontier emerging markets. The biggest casualties were Saudi Arabia and the UAE, which together raised
$10.5 billion last year in the midst of the oil price run-up but only generated $747 million in 2009.
During the post-crisis period, though the international IPO market came from a variety of different
industries, there emerged some common themes. In China, the rebound was largely driven by consumer
oriented businesses, financial IPOs, and the country’s booming real estate sector. The financial theme, seen
in US and China, was also echoed in other markets. The other notable theme that attracted most IPOs was
infrastructure, particularly in China and notably in India. With investors attracted by growing economies
and large government stimulus packages, a huge amount of capital was raised by companies in the capital
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goods, materials, energy, utilities and transportation sectors. India produced several large power generation
IPOs, while China saw a host of engineering and construction companies, Europe’s largest new issue was a
Polish utility service company. There were also IPOs by pipeline operators, shipping companies and energy
product manufacturers.
United States
During 2008, though the largest US IPO was launched, the IPO market was subdued by the global
economic crisis, year-old recession and tight credit mechanism. The market generated US$27 billion in 37
deals – an 82% decline in deal numbers and a 24% drop in fundraising compared with 2007. Even after
excluding the hefty Visa deal, the average 2008 US IPO deal size was quite substantial at US$207.7
million, a modest increase from the average deal size of US$198.8 million in 2007. The top IPO sectors for
funds raised in 2008 were financial services (insurance and banks) with US$20.0 billion raised (77% of
total capital raised), energy and power generating US$2.7 billion and materials comprising metals, mining
and paper yielding US$1.3 billion. The leading US IPO sectors in deal numbers were energy and power
with eight deals, healthcare with six offerings and the financial sector with five new issuances, including
Visa. Technology, finance and healthcare were the three US sectors which had the most withdrawals from
the IPO pipeline. The year 2009 for the US IPO market began as it had ended in 2008 – at a standstill. Only
one company went public during the first three months of the year was by Mead Johnson Nutrition Co., the
world’s biggest baby formula maker. However, as the broader equity indices improved, the IPO volume
improved sequentially in each of the next three quarters, buoyed by private equity-backed deals, mortgage
REITs and Chinese ADRs. For the year, there were 67 US IPOs, up 47% from 2008. Since the IPO market
has shrunk, many private companies may eventually succumb to a merger or an acquisition. In 2008, 59%
of funds raised through follow-on deals came from financial companies seeking capital to repair balance
sheets or to finance acquisitions. In Latin America, the number of IPOs was roughly the same in 2009 as in
2008. In 2009, nine IPOs raised a total of US$ 13.3 billion, whereas, 8 IPOs raised US$ 5.2 billion in 2008.
The Brazilian equity market led the Latin American IPO market. Of the US$ 13.3 billion raised in Latin
America, nearly US$ 13.2 billion was raised by Brazilian companies. Chile was the only other Latin
American country to have an IPO in 2009, with three companies raising a total of US$ 110.0 million.
Insert Fig. 2 here
The year 2010 saw the highest yearly fundraising on US exchanges since 2007 as the US emerged
from the recession (US$ 44 billion in 163 IPOs). About 40% of the 2010 amount, however, came from the
second-largest IPO in US history – the US$18.1 billion listing of automobile manufacturer General Motors
(GM) on the NYSE and Toronto. The US raised just 15% of global proceeds, a 60% increase in value from
the same period in 2009 but below its past 10 year average levels of 28%. Demand for capital by
fast-growth companies is still driving the IPO market in 2011, including many PE-or VC-backed companies
or small cap China-based listings. These IPOs accounted for more than two-thirds of all US deals,
reflecting the eagerness of the financial sponsors to monetize investments made earlier in the decade.
China
Following an unprecedented boom in 2006-07, China’s IPO market began its dramatic decline in late
2007, about a half year before the financial contagion spread into China. As a result of the financial crisis
and global recession, decreased activity was witnessed in China’s capital markets, with both the numbers of
IPO and value of capital raised dropping significantly in 2008. The decline was the outcome of speculation
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by retail investors and unreasonably inflated valuations. By the end of 2008, the Shanghai index had fallen
65% with the IPO markets generated 97 deals worth just US$ 18 billion, a decline of 51% by deal numbers
and 73% fund raised from the previous year. Even so, among all countries, China still ranked first in respect
to number of IPOs, placed second only to the US for amount of capital raised and hosted four out of the top
20 IPOs in 2008. China’s largest IPO in 2008 (and the second largest globally) was the US$5.7 billion
offering of China Railway Construction Corp. Ltd., followed in size by the US$1.56 billion offering of
China South Locomotive & Rolling Stock Corporation Ltd. The leading industries (by funds raised) were
industrials (building, construction, transportation and infrastructure) which raised US$8.8 billion or 49% of
total funds raised in Greater China; materials (metals, chemicals, mining) produced US$3.0 billion; and
consumer staples (agriculture, food, textiles) yielded US$ 2.3 billion. The top sectors by number of deals
in China were materials with 30 deals followed by industrials (26) and consumer staples (17). With stable
economic fundamentals and huge accumulated reserves of US$1.9 trillion, the focus of the Government in
China, as the world’s third largest economy, was to nip the economic slowdown in the bud. Through its
$586 billion fiscal stimulus package, Beijing’s goal, on the other, was to stem falling stock prices, facilitate
business access to bank loans, restore investor confidence and allow the economy to recover by the second
half of 2009. According to Hong Kong Exchanges and Clearing data, the IPO market was quiet especially
from the second quarter onwards, when the trading environment deteriorated further. Despite such
conditions, some key deals were completed successfully. Greater China’s vibrant IPO markets also reached
record fund-raising levels, accounting for 46% of global funds raised in 2010. The exchanges raised US$
130 billion in 440 deals, a huge 152% rise in total value from 2009. The US$ 22.1 billion IPO of
Agricultural Bank of China, the last of China’s big state-owned commercial banks to list, was the world’s
largest IPO ever in 2010.
Insert Fig. 3 here
European countries
European IPO markets in 2008 were subdued in the face of the deep recession and global economic
crisis. Tight credit markets and falling commodity prices also slashed corporate earnings and dragged down
most major European stock indices by more than 40%. During the year, 201 IPOs generated just US$ 7
billion, a 67% decline by number of deals and 85% decline by funds raised from the previous year. The
average deal size fell to US$80.9 million, down 56% from 2007. The biggest European IPO was the
US$2.5 billion offering of Czech coal producer New World Resources which listed on the London, Prague
and Warsaw Stock Exchanges. Portugal’s renewable energy company EDP Renovaveis was the next largest
IPO with US$2.4 billion offerings. During the first quarter of 2009, European IPO markets produced seven
IPOs worth $11.3 million altogether. Six of these offerings were from Poland. Germany, France, Spain and
Italy together generated 14 IPOs, worth only US$1.4 billion, a steep 94% decline in number and 95% in
funds raised from 2007. Bolstered by its continuing convergence with the European Union (EU) economy
and a burgeoning domestic pension fund, Poland hosted numerous (73) IPOs. However, by the fourth
quarter of 2008, the offerings momentum came to a halt, despite several large privatizations in the Polish
pipeline.
In the first half of 2008, the energy and power sector generated US$5 billion, or 37% of total capital
rose in the region, followed by materials (metals, mining and chemicals) which raised US$2.9 billion and
telecommunications produced US$2.5 billion. The leading sectors by IPO deal numbers were technology,
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with 24 deals, or 14% of the total number of deals in the region, industrials with 24 deals and consumer
products and services with 18 deals. In 2010, European IPOs began to revive, and achieved their highest
volume since 2007 (US$ 37 billion in 252 deals). In the first half of 2010, continued market dislocation and
sovereign debt crisis resulted in numerous withdrawals, postponements and highly discounted pricing.
However, during the second half, European investors regained their risk appetite, buoyed by improving
returns, a supportive interest rate environment and higher fund inflows into equities. Even so, while 2010
volumes represented a 395% rise from 2009, European IPO fund-raising remained far below the pre-crisis
levels in 2007 (US$ 100.4 billion). Europe accounted for just 13% of global captal raised, far less than the
10-year average of 25%. The energy and power sector raised the most capital (23%), followed by the
materials sector (which includes metals, mining and chemical companies).
Insert Fig. 4 here
India
In India, the corporate investment has been a significant source of economic growth over the past
several years. During the past decade, there has been tremendous growth in overall investment levels, from
less than 25% of GDP in 2000 to over 35% by 2006. Foreign financing of Indian corporations has increased
including external commercial borrowings, foreign direct investment, credit from foreign banks, and
foreign institutional investors that have participated in domestic equity markets. The global financial crisis
has made considerable impact on several sources of corporate financing. As foreign investors have been hit
by the crisis, they have pulled back from the Indian market and turned risk averse. While the second half of
2009 has seen a rebound in foreign inflows and the capital flows continues till 2010.
Insert Fig. 5 here
The private-sector issuances have been outpacing issuances by the public sector for the past several
years in the Indian primary market. A diverse array of companies from entertainment to banks, financial
institutions, construction, and infrastructure companies were the most frequent issuers in recent years.
While the number of IPOs declined from the peaks seen in the mid-90s when the markets first began to take
off, IPOs in the past several years have been generating ever increasing amounts of capital. In 2008, the
amount of capital raised averaged close to Rs. 500 crore per IPO, compared to a mean IPO size of less than
Rs.10 crore in the mid-1990s. In 2006, India’s IPO market made the list as one of the 10 biggest IPO
markets in the world. In 2008, the Reliance Power IPO became the biggest IPO in India’s history. The
almost US$ 3 billion offering was oversubscribed by approximately 10 times. When the global crisis hit
from mid-2008, the market fell dramatically. Between January 2008 and the Sensex low in March 2009, the
market declined 60% and P/E ratios dropped by more than 45% over the same time period. The fall was
also exacerbated by domestic investors who took money out of the market as job losses mounted and the
ongoing market decline began to hurt household wealth levels. India’s 36 IPOs in 2008 generated less than
US$ 5 billion, an over 60% drop in the number of deals and a 45% decline in funds raised compared with
2007. The combination of government support and the market rebound has increased the pace of equity
offerings since July 2008. In 2009, the IPO market began to pick up, boosted by offerings from the public
sector. However, uncertainty in the market lingered and there were again concerns of asset bubble could be
forming with foreign inflows. The country saw a dramatic recovery in its IPO markets in 2010 (US$ 8
billion in 63 IPOs. This revival has been a domestic consumption led-growth story driven by an influx of
capital from Western economies and a booming local stock market. India saw a growth of 215% in the
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number of IPOs compared to 2009. There was a string of follow-on offerings from many previously
state-owned enterprises in the materials sector such as steel, oil and gas – all of which helped the Indian
Government raise funds to build roads, ports and power plants. This materials sector activity stems from
India US$ 10 billion divestment programme that spawned the largest IPO in India ever, the listing of the
world’s largest coal producer, US$ 3.4 billion Coal India, a former state-owned enterprise.
Middle East and Africa
The ever-growing track record of positive return from IPOs, the stock market boom and seeking
diversification of portfolios by the high net worth retail investors led to stimulating new issuances in the
Middle East. The IPO markets, during the first three quarters of 2008, seemed relatively immune to global
financial contagion. The country emerged as one of the leading IPO markets, reinforced by a large backlog
of IPO candidates, as well as soaring oil prices, unprecedented liquidity, profitable domestic markets,
limited exposure to toxic assets and GDP growth of 6.5%. Middle East IPO markets (in particular, Saudi
Arabia), contributing around 14% of all global fund-raising, produced US$16 billion in 77 IPOs during
2008 as compared to US$ 20 billion comprising 190 IPOs in 2001. Since the last quarter of 2008, however,
Middle East IPO activity slumped significantly in response to the falling stock markets, weakened
economies, collapsed oil prices, tighter external financing and overheated property markets, which
conspired to affect IPO activity. In the first quarter of 2009, the Middle East hosted just two IPOs worth
US$83.6 million, both from Saudi Arabia. The average Middle East IPO deal size in 2008 was about the
same as the previous year, about US$259 million. The prominent sectors for fund-raising were materials
(metals, mining and chemicals), accumulating US$3.9 billion, or 30% of total capital raised in the region;
financial services, worth US$3.3 billion and telecommunications, valued at US$2.5 billion. By number of
deals, the top sectors were financial services, with 18 IPOs, or 35% of the total number of deals in the
region, industrials with 12 deals and real estate with 5 offerings.
The growth was fuelled by record levels of foreign direct investment and softening of regulations to
open up the Middle East markets to international investors. According to most of the analysts, it would take
some time for foreign investors to return to the region because of their domestic losses and continued
volatility in emerging markets. In 2010, the Middle East IPO markets saw a flat trend with 35 IPOs worth a
total of US$ 3.3 billion, a 59% increase from 2009 by capital raised. Africa also saw a jump of over 406%in
total proceeds, with 13 IPOs worth US$ 1.6 billion.
Insert Fig. 6 here
3. Material and Methods
The study is conducted based on data collected from the World Federation of Stock Exchanges
(WFSE), Global New Issues database published by Securities Data Company (SDC), National Stock
Exchange database (India) and WDI database published by World Bank. For each IPO, the database gives
detailed information on the issuer, the issue date, total proceeds, the number and type of shares offered and
the offer price. Moreover, information regarding the nature of the issue, either domestic or contains an
international tranche, and whether or not a tranche is offered to public or private investors are also
considered for the study. The transactions only which satisfy the benchmark set for the study, between April
2003 and March 2010, are then considered.
In respect to analysis of regressions, the dependent variable is considered as a measure of IPO activity.
For each country and in each year, the number of IPOs as well as the total proceeds raised through such
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process is computed. To calculate the IPO numbers and proceeds, the domestic IPOs are differentiated from
the global IPOs in the country of domicile are considered. Listed domestic companies include domestically
incorporated companies listed on the country’s stock exchanges at the end of the year and do not include
investment companies, mutual funds, REITs or other collective investment vehicles. GDP is reported in
current US dollars converted from domestic currencies using the year-end official exchange rate for that
country.
An important set of data in the study are country-specific institutional variables related to the quality
of investor, legal protections and securities laws related to disclosure requirements and enforcement
standards. From LLSV (1998), countries governed by common law have better organized institutions and as
such, we have used the common law as a dummy variable. A popular index of legal protections for minority
investors is the anti-director rights index of LLSV. DLLS (2008) has introduced an index of anti-self
dealing to address the ways in which the law deals with corporate self-dealing in a more theoretical way.
According to LLS (2006), securities laws that authorize prospectus disclosure and liability benefit stock
market development, including the breadth, size, and liquidity of the market. These measures are especially
useful for our study as they relate closely to the security issuance process through IPOs. They have also
suggested disclosure requirements index with components related to requirements for prospectuses, and for
providing information on compensation of directors and key officers, the issuer’s ownership structure,
related-party transactions with directors, officers or large block holders, and the presence of contracts
outside the ordinary course of business. The liability standard index comprises measures of four liability
standards in cases against issuers and directors, distributors, and accountants. The index of public
enforcement is based on five broad aspects of public enforcement: the basic characteristics of the
supervisory body for securities markets, the scope of its powers to regulate markets, its investigative
powers, its power to issue non criminal sanctions for violations of securities laws against issuers
distributors, and accountants, and whether, to whom, and when criminal sanctions for violations of
securities laws apply. Finally, LLSV (1998) has built an all-encompassing investor protection index which
comprises the first principal component of the burden of proof, disclosure, and the anti-director rights index.
We have also included a measure of the rule of law from the World Bank’s World Governance Indicators
database and political risk from the International Country Risk Guide (ICRG) database built by The PRS
Group Inc. In contrast to the LLSV and DLLS, these variables are measured every year.
A key mechanism through which poor institutions limit IPO activity is that they require more
co-investment by insiders at the IPO. Consequently, fewer IPOs are expected in countries where ownership
is optimally more concentrated. We have used a measure of ownership concentration from LLSV to
compute the average percentage of shares owned by the top three shareholders of the ten largest,
non-financial, private domestic firms in a country. In our regressions, to measure the level of economic
development in the country, we have used the log of GDP per capita (Log GDP / capita). This variable is
obtained from the WDI Database. For measuring financial market development, we have applied the
updated index of the Financial Development and Structure database, originally used in Beck and Levine
(2000). Data are also collected to measure market turnover ratio and market capitalization as a percentage
of GDP.
To accomplish control over the local market conditions as a factor in the going-public decision, we
have computed a country level measure of Tobin’s q in each year. The country-level measure of q is the
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weighted average of the median industry qs at market value. This is constructed analogously to the local
growth opportunities based on P/E ratios as used by Bekaert, Harvey, Lundblad, and Siegel (2007). To
capture global growth opportunities, we have also formed a global measure of q. For each year, the median
q and the relative market value for each global industry are computed. Global q, thus represents the
weighted average of global median of industry qs at market value. This measure is similar to the global
growth opportunities (GGO) measure as enunciated by Bekaert et al.
Finally, to put in order the unobservable global macroeconomic and capital market factors that
influence IPO activity around the world, a world IPO factor is constructed. The domestic IPOs (World
domestic IPO rate) and global IPOs (World global IPO rate) are measured in terms of IPO numbers per
listed firms and in terms of IPO proceeds per GDP. To compute the world IPO rate for a given country, the
IPO activity and the scale factor of that country are, however, excluded.
3.1 The IPO Sample: 2004 to 2010
The initial sample is comprised of 15017 observations, of which transactions with a single domestic
tranche that SDC qualifies as private placement (32 observations), 138 observations with a gap of 30 days
or more between issue dates and 27 transactions that do not contain any information on proceeds raised are
not considered. The data of some IPOs (859 observations), which are recorded over multiple lines in SDC,
even if there is only one tranche in the offering, are consolidated and excluded. Some foreign, including
global offers (2967 observations), recorded over multiple lines in SDC are consolidated into one line and
kept out of the study. We have also barred 41 transactions that do not have SIC codes, leaving us with
10953 observations, each of which represents a unique IPO.
To construct our final sample, we have left out an additional 803 IPOs, dropped 452 IPOs by real
estate investment trusts (REITs) and investment funds, 44 IPOs where the country of origin has no data
(Angola, Barbados, Cambodia, Dominican Republic, Faroe Islands, Georgia, Ghana, Iceland, Kazakhstan,
Lebanon, Macau, Malta, Netherlands Antilles, Slovenia, Ukraine, and Uruguay) and 28 IPOs from 16
countries without any domestic IPOs (only global IPOs) during the 7-year sample period. The final sample
thus contains 9626 IPOs of which 7028 are domestic and 2598 are foreign (international offerings with no
domestic tranche) and global offers (both domestic and foreign tranches included). In Table: 1, while the
first part shows IPOs based on numbers the second deals with the total IPO proceeds. Domestic IPO
proceeds do not include proceeds raised in the domestic tranche of global IPOs. For global IPOs, however,
the panel considers the total proceeds raised through global IPOs (proceeds raised in the domestic and
international tranches) and global proceeds raised in global IPOs (proceeds raised in the international
tranches only). The IPO proceeds are computed in terms of US dollars (billions) in 2010.
Insert Table-1 here
3.2 IPO Activity in Selected Countries around the World: 2004 to 2010
The IPO data is obtained from SDC and includes 9626 IPOs during 2004 to 2010. While Part I
demonstrates the top five countries based on total IPO counts, the top five countries based on total IPO
proceeds are shown in Part II. In this context, domestic IPO proceeds do not include proceeds raised
through domestic tranche of global IPOs. For global IPOs the panel reports total proceeds raised in global
IPOs (proceeds raised in the domestic and international tranches) and global proceeds raised in global IPOs
(proceeds raised in the international tranches only). Proceeds are in constant 2010 U.S. dollars (billions).
Insert Table-2 here
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4. Results
4.1 Descriptive Statistics
The following table demonstrates the average value of each variable of the selected countries. The
sample is restricted to five countries based on availability of data for GDP and for country q data are
restricted to for at least one year during the sample period from 2004-2010. Each variable is then averaged
across years within a given country and across the countries.
Insert Table-3 here
4.2 Regression Statistics
The annual measure of global IPO activity of each country is selected as dependent variable here. The
IPO data is composed from SDC and includes 2598 global IPOs that have data available for GDP and
country q for at least one year during the sample period from 2004 to 2010. For each country, global IPO
numbers and proceeds are summed annually. Part-I shows the regression of the data where the dependent
variable is the annual global IPO number of each selected country scaled by the total number of IPOs
during that year. On the other, Part-II shows the regression analysis, where the global IPO proceeds scaled
by the total number of IPO proceeds during that year is referred to as the dependent variable. The global
IPO proceeds, here also, do not include proceeds from the domestic tranche of the IPO. Both measures of
global IPO activity are subsequently multiplied by 100. The dependent variable is not taken into account, if
there is no IPO in a country during any given year. The world IPO rates are computed based on numbers
(proceeds). The domestic IPO rate and world domestic IPO rate include total domestic proceeds. All
variables are lagged by one year except the institutions variable.
The dependent variable is each country’s annual measure of global IPO activity. IPO data is from SDC
and includes 2598 global that have data available for GDP and for country q for at least one year during the
sample period from 2004 to 2010. For each country, global IPO numbers and proceeds are summed
annually. Tables 4, 6, 8 & 10shows regressions where the dependent variable is each country’s annual
global IPO count scaled by the total number of IPOs that year. Tables 5, 7, 9 & 11 shows regressions where
the dependent variable is each country’s annual global IPO proceeds scaled by the total number of IPO
proceeds that year. Global IPO proceeds do not include proceeds from the domestic tranche of the IPO.
Both measures of global IPO activity are multiplied by 100. The dependent variable is set to missing if
there are no IPOs in a given country in a given year. The world IPO rates are based on numbers (proceeds).
The domestic IPO rate and world domestic IPO rate include total domestic proceeds. With the exception of
the institutions variables, all variables are lagged by one year. Post 2008 is a dummy that equals one from
2008 to 2010.
5. Results and Discussion
The results obtained through panel regressions are based on global IPO numbers and proceeds. The
numbers of global IPOs include foreign IPOs and global IPOs with a domestic and international tranche.
These numbers are deflated by the total number of IPOs, both domestic and global IPOs. The global IPO
proceeds, on the other, are determined by deflating the total IPO proceeds, including domestic and global.
This process has helped us to determine and evaluate how intensively the firms in a country pursue the
global opportunities.
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We have also considered in the base specifications some additional factors to account for the changing
landscape of the global economic and capital market environment. Moreover, efforts are also made to
identify exclusively the factors influencing the unique country-level global IPO activity to control for the
level of global IPO activity in that country. The world global IPO rate (in terms of number) is measured in
terms of global IPO numbers per listed firms and global IPO proceeds per GDP. The world domestic IPO
rate is also included as is the actual domestic IPO activity rate in the country of interest. To avoid possibly
spurious findings, these variables are lagged by one year, as are all other control variables. To capture the
influence of differences in local country-specific growth opportunities and global growth opportunities, we
have included country q and global q in our regressions. For correlating these variables, we have interpreted
the coefficient on the global q ratio as a measure of growth opportunities that is independent of a country’s
institutions.
In the regressions displayed in the first columns of Tables 4, 6, 8 & 10for global IPO numbers and of
Panel-II for global IPO proceeds, it is observed that the coefficient on the global IPO factor is reliably
positive and economically large. This is what we would expect to observe if there are important
macroeconomic cyclical factors as well as common long-term secular forces of financial crisis of capital
markets that influence global IPO activity across all markets. In Tables 4, 6, 8 & 10, the coefficient of 4.231
implies that a one standard deviation increase in global IPO activity worldwide is associated with a 3.87%
increase in global IPO numbers in a country, which represents 10% of the standard deviation of global IPO
activity. The equivalent coefficient for global IPO proceeds in Tables 4, 6, 8 & 10 is also significant and
economically large. We have also located reliable evidence that the level of domestic IPO activity is
negatively related to the fraction of IPO numbers and proceeds that are global. However, the economic
importance of this relationship is even larger. For counts in Tables 4, 6, 8 & 10, the coefficient on the
domestic IPO rate is -2.148 which implies that standard deviation increase in domestic IPO numbers per
listed companies is associated with a 11.4% decrease in the fraction of IPOs that are global, which is about
31% of the standard deviation of global IPO activity. The economic importance of the negative influence of
domestic IPO activity by proceeds is found much smaller. We also encounter that market turnover is
negatively related to the intensity of global IPO activity by numbers and proceeds – both of which are
reliable indicators to establish that robust domestic IPO activity is associated with fewer and less global
IPO activity, not more. None of the other variables explanatory, though the positive coefficient on log (GDP
/ capita) is marginally significant for global q in respect to global IPO proceeds. The overall explanatory
power of the base specification is reasonably good for the global IPO proceeds (adjusted R 2 of 11%), and
even better for global IPO counts (adjusted R2 of almost 15%).
5.1 The Importance of Global IPO Activity
In the first regressions, we have added one national institutions proxy variable in each subsequent
column in both panels. This has done to determine whether legal protections for minority investors,
securities laws, disclosure rules, and their enforcement in a country influence the intensity with which firms
pursue global IPOs, even after controlling for the overall level of domestic and global IPO activity, growth
opportunities, and market conditions. We have found a reliable and important negative relationship for
many of these variables. For example, where countries with better anti-director rights are associated with
much less global IPO activity, the negative coefficient on anti-director of (-) 6.27 in Tables 4, 6, 8 &
10implies a 6.48% lower fraction of global IPO numbers, which accounts for about 16% of its standard
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deviation. The relationship is negative but weaker in Tables 4, 6, 8 & 10 for global IPO proceeds. The study
has also observed a similarly reliable negative relationship for the intensity of global IPO numbers using
the common law dummy as well as the anti-self-dealing, disclosure, and investor protection indexes. There
exists, it is found, a positive relationship between ownership and the extent of global IPO activity and has
been confirmed in the last column of Tables 4, 6, 8 & 10.
The statistical and economic significance of the national institutions proxy variables are often weaker
in regressions for the intensity of global IPO activity by proceeds in Tables 4, 6, 8 & 10 than in the count
regressions in Tables 4, 6, 8 & 10, and the results are found mostly consistent in both the panels. Again,
while the institution variables generally have significant positive coefficients for domestic IPO proceeds, a
significant negative or insignificant coefficient has also been found for the global IPO proceeds regressions.
As in Tables 4, 6, 8 & 10 for the global IPO count, disclosure and investor protection, though having
reliably negative coefficients, are considered as the most reliable national institutions variables. The
coefficient of -21.52 on disclosures implies a higher score of one standard deviation with a 6.14% decline
in the fraction of IPO proceeds that are global offerings, which represents about 19% of its standard
deviation. The rule of law is negatively related to the global fraction of IPO proceeds where ownership is
positively related, as expected. The common law dummy, the anti-director rights index and the
anti-self-dealing index have negative coefficients, though found significant only at the 10% level. It is
identified in the previous section that national institutions became less important determinants of domestic
IPO activity in the second half of our sample, however, it is to be investigated whether the same result
holds good for global IPOs as well.
5. 2 Comparing Global IPO Activity between Pre-crisis and Post-crisis
We have developed the same base design for our panel regressions as in the previous section, but have
introduced a dummy variable for the post-crisis (post-2008) period and allowed this variable to interact
with the proxy variable for the quality of national institutions in each additional specification. In the first
specification in Tables 4, 6, 8 & 10, the Post-2008 dummy variable is found insignificant, which implies
that there is no important shift across sub-periods in the overall fraction of IPO numbers that are global. It
has also observed the same result for the first specification in Tables 4, 6, 8 & 10 for the fraction of IPO
proceeds that are global. However, when other national institution variables are introduced, we have
uncovered the expected negative relation that is established in Tables 4, 6, 8 & 10. It is opined that the
higher is the quality of a country’s institutions; the lower is the fraction of IPO numbers that are global. The
interactions of the institutions variables with the Post-2008 dummy variable are significant and of the
predicted sign, but for only three variables: anti-director, anti-self dealing, and ownership. In other words,
the importance of the quality of a country’s institutions is weakened for some institutions variables, but
clearly not for the majority of them. When the effect of an institution is weakened, the modification is
found economically significant considering the statistically significant and negative coefficient on the
anti-director index of 10.628. This coefficient implies an 11.66% lower fraction of global IPO numbers
during pre-2008, which accounts for 30% of its standard deviation. But the positive, significant coefficient
of 6.188 on the interaction variable with the post-2008 dummy implies only a 4.87% lower fraction of
global IPO numbers, such reversal effects during the period of 2008 are similarly remarkable for
anti-self-dealing index and, to a similar extent, for ownership variable.
It is found by the results of IPO proceeds in Tables 4, 6, 8 & 10, the importance of common law
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decreases during 2008 instead of anti-director index, which was expected. For countries, with common law
origins, our analysis indicates that there is a 16.31% lower fraction of total IPO proceeds raised globally.
During the same period, the positive coefficient on the interaction of the common law dummy with the
Post-2008 dummy results a fall in global proceeds to only a 6.2% lower fraction of total IPO proceeds.
Global IPOs, as is said, are avenues for firms to exploit the best of the global investors in the form of
better institutions, both domestic and global, to have a successful or more profitable IPO. The advantage of
the institutions of foreign countries, however, is inversely related to the quality of a firm’s domestic
institutions, and as such, it is not surprising that domestic institutions play an opposite role for global and
domestic IPOs. It is also evidenced in respect to both domestic and global IPOs that domestic institutions
become less significant during post-crisis period than during the pre-crisis periods. This evidence is
substantially more prominent for domestic IPOs than global IPOs. A possible explanation for this finding is
that financial crisis has increasingly enabled firms whose value is most closely tied to the quality of
institutions to use global IPOs and to take advantage of the institutions from foreign countries.
6. Conclusions
This study aspires to make a sincere attempt on the global and domestic IPO activity and has
observed a dramatic change in the IPO landscape around the globe. Global IPOs have proved themselves to
become more important, whether one looks at numbers or at proceeds. In fact, global IPOs have played a
critical role in increasing the importance of IPOs by domestic firms, as firms in countries with weaker
institutions are less likely to go public with a domestic IPO rather in a global IPO. Thus, global IPOs enable
firms always make efforts to overcome poor institutions in their country of origin. Perhaps as a result, the
laws and institutions of such countries become significantly less important in affecting the rate and velocity
of IPO activity. The global drivers used to make a significant contribution in encouraging domestic IPO
activity. As such, higher levels of global IPO activity outside a country are not strongly and positively
related to the level of global IPO activity in that country. However, global IPO activity is also related to
domestic market conditions. Firms are more likely to choose to go public at home when valuations are
higher in the home market. Finally, our focus is resolutely on cross-country variation in global IPO activity,
but as a result we highlight the decreasing role of domestic IPOs in the post-crisis periods.

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Table-1: The IPO sample: 2004 to 2010
Part-I IPO Numbers
Year All IPOs Domestic IPOs Global IPOs
2004 1529 1297 232
2005 1473 1223 250
2006 1679 1314 365
2007 1850 1116 734
2008 884 587 297
2009 695 502 193
2010 1516 989 527
Total 9626 7028 2598
Part-II IPO Proceeds
2004 $71.6
2005 $133.8 $62.2 $66.8
2006
2007 $149.4 $82.6 $102.1
2008
2009 $223.7 $121.6 $188.7
2010 $48.2
Total $278.6 $89.9 $42.0

$111.5 $63.3 $128.0

$115.0 $73.0 $647.4

$355.0 $227.0

$1367.0 $719.6
Table-2: IPO activity for the top 5 countries around the world: 2004 to 2010
Part-I IPO Numbers
Global IPOs
Countries All IPOs Domestic IPOs

US 1151 846 305
China 1238 935 303
Europe 2409 1976 433
India 366 348 18
Middle East and Africa 479 413 66
Total of top 5 5643 4518 1125
Rest of the World 3983 2510 1473
Total of all countries 9626 7028 2598

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Part-II IPO Proceeds
US $285 $149 $136
China $351 $207 $144
Europe $361 $234 $127
India $36 $21 $15
Middle East and Africa $53 $37 $16
Total of top 5 $1086 $648 $438
Rest of the World $281 $71.6 $209.4
Total of all countries $1367 $719.6 $647.4

Table-3: Descriptive Statistics
Variables Mean Median S.D. 1st Quartile 3rd Quartile
V1 47.92 49.28 26.63 25.00 69.61
V2 45.70 44.59 20.76 32.82 57.46
V3 3.68 3.73 0.23 3.71 3.75
V4 0.15 0.15 0.003 0.15 0.15
V5 0.24 0.24 0.004 0.24 0.24
V6 0.74 0.73 0.03 0.73 0.74
V7 0.11 0.11 0.01 0.12 0.12
V8 2.49 1.16 2.85 0.35 3.88
V9 0.20 0.15 0.18 0.07 0.26
V10 0.30 0.00 0.46 0.00 1.00
V11 3.44 3.50 1.12 3.00 4.00
V12 0.48 0.44 0.24 0.29 0.64
V13 0.62 0.58 0.21 0.50 0.75
V14 0.48 0.44 0.25 0.22 0.66
V15 0.51 0.55 0.22 0.33 0.67
V16 0.48 0.46 0.23 0.35 0.61
V17 73.49 75.68 11.62 66.07 83.52
V18 0.76 0.86 0.92 -0.01 1.64
V19 0.46 0.51 0.13 0.39 0.56
V20 1.27 1.29 0.19 1.18 1.36
V21 1.25 1.26 0.00 1.26 1.26
V22 0.59 0.43 0.52 0.22 0.82
V23 0.58 0.48 0.49 0.23 0.72
V24 8.88 9.28 1.38 7.97 10.13

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Table-4: Global IPO numbers scaled by total number of IPOs

C Anti-director Anti-self Disclosure Burden of
Common dealing proof
law
Constant -5.65 4.31 13.93 6.34 11.55 -0.07
(-0.47) (0.30) (2.04) (0.06) (0.89) (-0.001)
Institutions variable - -6.27** 4.78*** -16.05** -21.52*** -8.28
- (-1.08) (-1.18) (-1.52) (-1.33) (-1.22)
Domestic IPO rate -2.148 -1.10*** -2.34*** -2.97*** -1.64*** -2.80***
(-4.26) (-2.89 (-3.27) (-3.26) (-2.94) (-3.16)
World domestic IPO rate 0.687 0.20** 1.32** 1.18** 0.56* 0.86*
(0.98) (1.87) (2.32) (0.04) (0.79) (1.77)
World global IPO rate 7.624 8.24*** 3.71*** 3.15*** 0.610** 6.75***
(1.89) (2.03) (2.40) (1.26) (1.03) (1.88)
Country q 4.231 1.76 0.57 2.21 2.90 6.22
(0.76) (0.34) (0.34) (0.60) (0.64) (1.07)
Global q 6.723 1.34 7.494 4.54 3.04 4.33
(0.34) (0.57) (0.37) (0.27) (0.31) (0.07)
Market cap / GDP -3.684 0.16 0.31 -0.32 2.86 -0.68
(-0.94) (0.01) (0.17) (-0.01) (1.01) (-0.27)
Market turnover -4.874 -3.37*** -3.11** -3.59** -3.35*** -3.98***
(-1.63) (-1.04) (-1.39) (-1.05) (-1.87) (-2.07)
Log (GDP / capita) 1.986 1.34 2.28 2.92 0.99 3.43**
(1.08) (0.25) (0.66) (1.03) (0.65) (1.07)
Number of observations 200 200 200 200 200

Adjusted R2 0.2127 0.3258 0.2036 0.2697 0.2438

Table-5: Global IPO proceeds scaled by total IPOs proceeds

Common Anti-director Anti-self Disclosure Burden of
law dealing proof
Constant -13.59 -8.67 -3.76 -8.06 4.99 -9.62
(-0.61) (-0.37) (-0.19) (-0.68) (0.19) (-0.79)
Institutions variable - -6.33* -2.16* -7.97* -22.88*** -6.31
- (-1.37) (-0.92) (-1.15) (-3.99) (-1.10)
Domestic IPO rate -6.87*** -7.46*** -6.76*** -9.64*** -10.24*** -8.37**
(-2.82) (-2.85) (-2.14) (-1.84) (-4.24) (-4.53)

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World domestic IPO rate 4.11 6.42 7.34 8.06 7.84 8.97
(0.05) (0.35) (0.81) (0.27) (0.41) (0.62)
World global IPO rate 37.85*** 34.76** 36.33** 34.73** 20.87* 31.97*
(1.81) (1.19) (1.32) (2.36) (1.71) (1.99)
Country q -2.17 -2.52 -4.77 -0.67 -5.257 -2.866
(-0.72) (-0.60) (-1.06) (-0.18) (-0.94) (-0.48)
Global q 20.06* 23.66* 25.43** 31.78** 25.34* 43.550*
(1.06) (1.00) (1.15) (1.05) (2.00) (1.99)
Market cap / GDP 0.22 3.67 1.35 2.13 8.95** 3.38
(0.002) (1.04) (0.52) (0.27) (2.24) (0.83)
Market turnover -5.73*** -7.28*** -6.24** -7.20** -8.82*** -9.60***
(-4.19) (-3.11) (-2.37) (-4.85) (-5.36) (-6.30)
Log (GDP / capita) 1.81* 0.85 0.58 1.71 1.13 2.34
(1.10) (0.49) (0.86) (0.85) (0.69) (1.38)
Number of observations 200 200 200 200 200 200

Adjusted R2 0.1128 0.1389 0.1298 0.1276 0.1506 0.1211

The t-statistics (in parentheses) are adjusted for clustering on countries – they are computed assuming
observations are independent across countries, but not within countries. *t-statistic is significant at 10%
level of significance, ** t-statistic is significant at 5% level of significance and *** t-statistic is significant
at 1% level of significance.

Table-6: Global IPO numbers scaled by total number of IPOs

Public Investor Political Rule of Ownership
enforce protection risk law
Constant 1.628 11.187 -6.444 -33.104 -85.898**
(0.04) (0.30) (-0.20) (-0.91) (-2.43)
Institutions variable -12.291 -24.561** 0.163 -6.962 97.302***
(-0.73) (-2.44) (0.45) (-1.67) (6.14)
Domestic IPO rate -3.888*** -3.751*** -3.362*** -3.199*** -3.429*
(-6.43) (-6.56) (-6.33) (-5.57) (-6.12)
World domestic IPO rate 1.001* 1.061* 1.159** 1.284** 1.334**
(1.72) (1.85) (2.06) (2.27) (2.36)
World global IPO rate 12.064*** 11.675*** 14.209*** 12.351*** 11.270***
(3.02) (2.86) (3.53) (3.03) (2.89)
Country q 8.875 8.566 6.551 8.102 9.748
(1.28) (1.28) (1.06) (1.35) (1.54)

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Global q 6.975 5.207 9.250 5.372 0.708
(0.27) (0.21) (0.40) (0.23) (0.03)
Market cap / GDP -1.660 0.869 -5.200 -5.278 -2.182
(-0.39) (0.22) (-1.22) (-1.34) (-0.65)
Market turnover -7.380*** -7.347*** -6.007** -6.910** -0.297
(-3.12) (-3.14) (-2.20) (-2.61) (-0.15)
Log (GDP / capita) 3.540* 3.201* 2.303 7.761** 7.670***
(1.79) (1.76) (0.65) (2.54) (5.11)

Adjusted R2 0.2593 0.2729 0.2353 0.2444 0.3369

Constant -29.327 -17.083 -22.337 -67.968* -102.1***
(-0.89) (-0.56) (-0.78) (-2.00) (-3.08)
Institutions variable -2.972 -18.615** -0.264 -8.643** 78.190***
(-0.20) (-2.06) (-0.74) (-2.45) (5.26)
Domestic IPO rate -18.71*** -17.52*** -16.59*** -15.01*** -17.27***
(-4.20) (-4.37) (-4.24) (-3.84) (-4.32)
World domestic IPO rate 12.431 10.360 14.306 11.988 11.894
(0.65) (0.55) (0.77) (0.67) (0.65)
World global IPO rate 46.194** 43.244* 51.947** 37.874* 32.786
(2.07) (1.93) (2.42) (1.73) (1.49)
Country q -2.595 -2.780 -3.173 -2.002 -1.034
(-0.42) (-0.46) (-0.57) (-0.36) (-0.20)
Global q 43.682* 44.084* 42.012* 44.538** 47.743**
(1.96) (1.98) (2.01) (2.14) (2.02)
Market cap / GDP 2.272 5.003 1.276 0.740 3.114
(0.54) (1.21) (0.34) (0.20) (1.07)
Market turnover -9.964*** -10.05*** -10.11*** -10.99*** -4.312**
(-5.99) (-6.32) (-6.44) (-6.38) (-2.43)
Log (GDP / capita) 2.389 1.741 4.005 7.550*** 5.238***
(1.37) (1.02) (1.32) (2.89) (3.85)
2
Adjusted R 0.1234 0.1371 0.1232 0.1402 0.1958

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Table-8: Global IPO numbers scaled by total number IPOs
law dealing proof
Constant -3.395 21.830 53.654 27.043 16.258 23.547
(-0.10) (0.64) (1.59) (0.78) (0.54) (0.82)
Post 2008 - -7.851** -27.435*** 13.126** -4.234** -12.314**
- (-2.49) (-3.05) (-2.34) (-1.84) (-2.13)
*** *** *** ***
Institutions variable - -20.947 -10.628 -35.028 -19.547 -32.658***
- (-2.82) (-3.37) (-2.98) (-2.01) (-1.84)
Institutions*Post 2008 -2.224 9.011 6.188** 16.149* 8.564 12.569*
(-0.68) (1.55) (2.58) (1.77) (1.14) (1.24)
Domestic IPO rate -3.326*** -3.066*** -3.366*** -2.960*** -2.952*** -2.058***
(-5.92) (-5.91) (-7.51) (-5.26) (-4.57) (-4.35)
World domestic IPO 0.769 0.599 0.656 0.617 0.847 0.554
rate (1.27) (1.03) (1.12) (1.04) (0.875) (0.93)
World global IPO rate 13.751 13.555*** 14.400*** 13.782*** 11.247*** 10.548***
(3.44) (3.40) (3.61) (3.46) (2.54) (2.64)
Country q 6.962 6.421 2.555 4.960 5.986 3.621
(1.17) (1.02) (0.44) (0.76) (0.99) (0.67)
Global q 0.227 2.853 5.918 3.698 2.367 2.687
(0.32) (0.12) (0.26) (0.16) (0.07) (0.14)
Market cap / GDP -5.327 0.718 0.973 0.266 0.652 0.326
(-1.26) (0.17) (0.24) (0.06) (0.14) (0.09)
Market turnover -6.620 -7.534*** -6.434** -6.437** -6.884*** -4.875**
(-2.49) (-2.78) (-2.41) (-2.42) (-2.41) (-1.88)
Log (GDP / capita) 3.937 2.343 2.330 2,964 2.008 2.669
(1.97) (1.25) (1.30) (1.41) (0.87) (1.08)

Adjusted R2 0.2383 0.2701 0.2788 0.2584 .02601 0.2487



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Vol 2, No 4, 2011
law dealing proof
Constant -2.882 -31.24 -9.67 -15.36 -45.26* -98.32***
(-0.17) (-0.96) (-0.50) (-0.58) (-1.84) (-2.77)
Post 2008 - -2.087 -15.355** -0.305 -7.652** 74.585***
- (-0.12) (-1.67) (-0.85) (-2.13) (4.98)
Institutions variable - -11.57*** -14.237*** -14.35*** -12.34*** -15.86***
- (-3.89) (-3.66) (-3.99) (-3.02) (-3.65)
Institutions*Post 2008 -1.995 11.258 9.689 11.658 9.657 10.352
(-0.54) (0.52) (0.47) (0.68) (0.63) (0.70)
Domestic IPO rate -2.874*** 41.697** 37.589* 46.357** 32.547* 30.643
(-4.34) (1.98) (0.88) (2.04) (1.24) (1.18)
World domestic IPO rate 0.557 -3.024 -2.054 -4.001 -1.884 -1.147
(1.03) (-0.48) (-0.56) (-0.66) (-0.29) (-0.26)
World global IPO rate 10.258 38.635* 40.214* 39.231* 41.366** 44.698**
(2.65) (1.25) (1.34) (1.74) (1.83) (1.84)
Country q -6.107 -7.227 -6.247 2.441 1.114 3.294
(1.14) (1.68) (1.54) (0.56) (0.58) (1.86)
Global q 1.684 -14.358*** -5.24*** -8.269*** -2.356*** -4.323**
(-0.89) (-4.24) (-2.17) (-4.221) (-1.87) (-3.54)
Market cap / GDP 4.772 2.658 4.854 1.200 0.652 4.021
(0.98) (0.68) (0.87) (0.30) (0.18) (1.21)
Market turnover 0.234 -10.005*** -9.36*** -9.621*** -9.682*** -3.654**
(0.27) (-3.88) (-4.96) (-5.32) (-5.47) (-2.04)
Log (GDP / capita) 3.004 2.304 1.587 5.005 6.895*** 4.265***
(1.46) (1.21) (1.26) (1.04) (2.47) (3.12)

Adjusted R2 0.2187 0.1189 0.1293 0.1249 0.1357 0.1827
Table- 10: Global IPO numbers scaled by total number of IPOs

Constant 0.63 9.19 -6.44 27.11 -66.55**
(0.04) (0.30) (-0.20) (-0.91) (-2.43)
Post 2008 -12.291 -24.561** 0.163 -6.962 97.302***
(-0.73) (-2.44) (0.45) (-1.67) (6.14)
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Vol 2, No 4, 2011
Institutions variable -3.888*** -3.751*** -3.362*** -3.199*** -3.429*
(-6.43) (-6.56) (-6.33) (-5.57) (-6.12)
Institutions*Post 2008 1.001* 1.061* 1.159** 1.284** 1.334**
(1.72) (1.85) (2.06) (2.27) (2.36)
Domestic IPO rate 12.064*** 11.675*** 14.209*** 12.351*** 11.270***
(3.02) (2.86) (3.53) (3.03) (2.89)
(1.28) (1.28) (1.06) (1.35) (1.54)
World global IPO rate 6.975 5.207 9.250 5.372 0.708
(0.27) (0.21) (0.40) (0.23) (0.03)
Country q -1.660 0.869 -5.200 -5.278 -2.182
(-0.39) (0.22) (-1.22) (-1.34) (-0.65)
Global q -7.380*** -7.347*** -6.007** -6.910** -0.297
(-3.12) (-3.14) (-2.20) (-2.61) (-0.15)
Market cap / GDP 3.540* 3.201* 2.303 7.761** 7.670***
(1.79) (1.76) (0.65) (2.54) (5.11)
Market turnover -7.534*** -6.434** -6.437** -6.884*** -4.875**
(-2.78) (-2.41) (-2.42) (-2.41) (-1.88)
Log (GDP / capita) 2.343 2.330 2,964 2.008 2.669
(1.25) (1.30) (1.41) (0.87) (1.08)

Adjusted R2 0.2593 0.2729 0.2353 0.2444 0.3369


Constant -27.88 -12.96 -16.84 -44.57* -94.57***
(-0.74) (-0.73) (-0.86) (-2.31) (-2.83)
Post 2008 -10.441 -20.354** 0.185 -5.324 84.117***
(-0.84) (-3.01) (0.38) (-2.00) (5.88)
Institutions variable -2.972 -18.615** -0.264 -8.643** 78.190***
(-0.20) (-2.06) (-0.74) (-2.45) (5.26)
Institutions*Post 2008 1.744* 1.547* 1.421** 1.567** 1.402**
(2.03) (1.48) (1.84) (1.97) (2.71)
Domestic IPO rate -18.71*** -17.52*** -16.59*** -15.01*** -17.27***
(-4.20) (-4.37) (-4.24) (-3.84) (-4.32)
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Vol 2, No 4, 2011
(0.92) (0.62) (0.82) (0.59) (0.87)
World global IPO rate 46.194** 43.244* 51.947** 37.874* 32.786
(2.07) (1.93) (2.42) (1.73) (1.49)
Country q -2.595 -2.780 -3.173 -2.002 -1.034
(-0.42) (-0.46) (-0.57) (-0.36) (-0.20)
Global q 43.682* 44.084* 42.012* 44.538** 47.743**
(1.96) (1.98) (2.01) (2.14) (2.02)
Market cap / GDP 2.272 5.003 1.276 0.740 3.114
(0.54) (1.21) (0.34) (0.20) (1.07)
Market turnover -7.659*** -9.566*** -12.474*** -13.252*** -3.896**
(-4.89) (-6.02) (-5.87) (-5.62) (-2.85)
Log (GDP / capita) 1.875 1.563 3.954 6.239*** 5.008***
(1.42) (1.57) (0.99) (3.02) (3.21)

Adjusted R2 0.1206 0.1302 0.1189 0.1384 0.1844


Appendix-1
Meaning of the Variables
Variables Derivation
Global IPO number / Total number of Number of global IPOs in country j in year t / Total number of IPOs in
IPOs (V1) country j in year t and is multiplied by 100
Global IPO proceeds / Total IPO Increase in Global IPO proceeds in country j in year t / Total IPO proceeds
proceeds (V2) raised in country j in year t and is multiplied by 100 (Global IPO proceeds
include proceeds raised in the international tranches only)
World domestic IPO rate (based on Total number of world domestic IPO in year t / Total number of domestic
numbers) (V3) listed firms worldwide in year t-1 and is multiplied by 100 (To compute the
world domestic IPO rate for country j, number of domestic IPOs and the
number of domestic listed firms for country j are excluded from the
calculation)
World domestic IPO rate (based on Increase in total world proceeds in domestic IPOs in year t / Total worldwide
proceeds) (V4) GDP in year t-1 and is multiplied by 100 (To compute the world domestic IPO
rate for country j, IPO proceeds and GDP for country j are excluded from the
calculation)

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