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

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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 firmfinancing 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

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Research Journal of Finance and Accounting www.iiste.org ISSN 2222-1697 (Paper) ISSN 2222-2847 (Online) Vol 2, No 4, 2011 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 investor sentiment and the volatility in equity markets have also acted as the major impediments to the performance of global IPO market. Investors 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. Feds 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 99

Research Journal of Finance and Accounting www.iiste.org ISSN 2222-1697 (Paper) ISSN 2222-2847 (Online) Vol 2, No 4, 2011 feedback in the advanced economies, policies were initiated by the respective governments aiming to address both financial trauma and economic downturn. 1.2 Objectives The main objectives of the present work are to make a study about global IPO market during the preand 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 100

Research Journal of Finance and Accounting www.iiste.org ISSN 2222-1697 (Paper) ISSN 2222-2847 (Online) Vol 2, No 4, 2011 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$828 million carve-out IPO of Mead Johnson Nutrition Co. on the New York Stock Exchange (NYSE). However, in 2010, the IPO activity bounced back heavily throughout the world with proceeds of US$ 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. Indias 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 101

Research Journal of Finance and Accounting www.iiste.org ISSN 2222-1697 (Paper) ISSN 2222-2847 (Online) Vol 2, No 4, 2011 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 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 consumeroriented 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 Europes 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 countrys 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 102

Research Journal of Finance and Accounting www.iiste.org ISSN 2222-1697 (Paper) ISSN 2222-2847 (Online) Vol 2, No 4, 2011 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 goods, materials, energy, utilities and transportation sectors. India produced several large power generation IPOs, while China saw a host of engineering and construction companies, Europes 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$1.3 billion. The leading US IPO sectors in deal numbers were energy and power with eight deals, healthcare with six offerings and the financial sector with five new issuances, including Visa. Technology, finance and healthcare were the three US sectors which had the most withdrawals from the IPO pipeline. The year 2009 for the US IPO market began as it had ended in 2008 at a standstill. Only one company went public during the first three months of the year was by Mead Johnson Nutrition Co., the worlds biggest baby formula maker. However, as the broader equity indices improved, the IPO volume improved sequentially in each of the next three quarters, buoyed by private equity-backed deals, mortgage REITs and Chinese ADRs. For the year, there were 67 US IPOs, up 47% from 2008. Since the IPO market has shrunk, many private companies may eventually succumb to a merger or an acquisition. In 2008, 59% of funds raised through follow-on deals came from financial companies seeking capital to repair balance sheets or to finance acquisitions. In Latin America, the number of IPOs was roughly the same in 2009 as in 2008. In 2009, nine IPOs raised a total of US$ 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 fastgrowth 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, Chinas 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 103

Research Journal of Finance and Accounting www.iiste.org ISSN 2222-1697 (Paper) ISSN 2222-2847 (Online) Vol 2, No 4, 2011 and global recession, decreased activity was witnessed in Chinas capital markets, with both the numbers of IPO and value of capital raised dropping significantly in 2008. The decline was the outcome of speculation 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. Chinas 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 worlds third largest economy, was to nip the economic slowdown in the bud. Through its $586 billion fiscal stimulus package, Beijings goal, on the other, was to stem falling stock prices, facilitate business access to bank loans, restore investor confidence and allow the economy to recover by the second half of 2009. According to Hong Kong Exchanges and Clearing data, the IPO market was quiet especially from the second quarter onwards, when the trading environment deteriorated further. Despite such conditions, some key deals were completed successfully. Greater Chinas vibrant IPO markets also reached record fund-raising levels, accounting for 46% of global funds raised in 2010. The exchanges raised US$ 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 Chinas big state-owned commercial banks to list, was the worlds 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. Portugals 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 104

Research Journal of Finance and Accounting www.iiste.org ISSN 2222-1697 (Paper) ISSN 2222-2847 (Online) Vol 2, No 4, 2011 rose in the region, followed by materials (metals, mining and chemicals) which raised US$2.9 billion and telecommunications produced US$2.5 billion. The leading sectors by IPO deal numbers were technology, with 24 deals, or 14% of the total number of deals in the region, industrials with 24 deals and consumer products and services with 18 deals. In 2010, European IPOs began to revive, and achieved their highest volume since 2007 (US$ 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, Indias 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 Indias 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. Indias 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$ 8 105

Research Journal of Finance and Accounting www.iiste.org ISSN 2222-1697 (Paper) ISSN 2222-2847 (Online) Vol 2, No 4, 2011 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 number of IPOs compared to 2009. There was a string of follow-on offerings from many previously stateowned 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 worlds 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. 106

Research Journal of Finance and Accounting www.iiste.org ISSN 2222-1697 (Paper) ISSN 2222-2847 (Online) Vol 2, No 4, 2011 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 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 countrys 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 antiself 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 issuers 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 Banks 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 coinvestment 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 107

Research Journal of Finance and Accounting www.iiste.org ISSN 2222-1697 (Paper) ISSN 2222-2847 (Online) Vol 2, No 4, 2011 have computed a country level measure of Tobins q in each year. The country-level measure of q is the 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). 108

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

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Research Journal of Finance and Accounting www.iiste.org ISSN 2222-1697 (Paper) ISSN 2222-2847 (Online) Vol 2, No 4, 2011 global opportunities. 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 countrys 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 R2 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 & 110

Research Journal of Finance and Accounting www.iiste.org ISSN 2222-1697 (Paper) ISSN 2222-2847 (Online) Vol 2, No 4, 2011 10implies a 6.48% lower fraction of global IPO numbers, which accounts for about 16% of its standard 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-selfdealing 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 countrys 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 countrys 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 antidirector 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. 111

Research Journal of Finance and Accounting www.iiste.org ISSN 2222-1697 (Paper) ISSN 2222-2847 (Online) Vol 2, No 4, 2011 It is found by the results of IPO proceeds in Tables 4, 6, 8 & 10, the importance of common law 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 firms 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.
References Allen F. and G. Faulhaber (1989). Signaling by Underpricing in the IPO Market, Journal of Financial Economics; 23: 303-23. Beck and Levine (2000). Levine-Loayza-Beck Data Set: Financial Intermediation and Growth, The World Bank Group, 1-3. Bekaert, G., C. R. Harvey, C. Lundblad, and S. Siegel (2007). Growth Opportunities and Market Integration, Journal of Finance, 62, 1081-1137. Black, Bernard S., and Ronald J. Gilson (1998). Venture Capital and the Structure of Capital Markets: Banks versus Stock Markets, Journal of Financial Economics 47, 243-277. Bloomberg, Various Issues Doidge, Craig, G. Andrew Karolyi, and Ren M. Stulz (2007). Why Do Countries Matter So Much For

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Research Journal of Finance and Accounting www.iiste.org ISSN 2222-1697 (Paper) ISSN 2222-2847 (Online) Vol 2, No 4, 2011 Corporate Governance? Journal of Financial Economics 86, 1-39. Doidge, Craig, G. Andrew Karolyi, and Ren M. Stulz (2011). The U.S. Left Behind: The Rise of IPO Activity Around the World Charles A. Dice Center for Research in Financial Economics, Dice Center WP 2011-8, Fisher College of Business WP 2011-03-008 Doidge, Craig, G. Andrew Karolyi, and Ren M. Stulz (2009). Has New York Become less Competitive than London in Global Markets? Evaluating Foreign Listing Choices over Time, Journal of Financial Economics 91, 253-277. Henderson, Brian, Narasimhan Jegadeesh, and Michael S. Weisbach, (2006). World Markets for Raising New Capital, Journal of Financial Economics 82, 63-101. Helwege, Jean and Nellie Liang (2001). Initial Public Offering in Hot and Cold Market, Working Paper, Federal Reserve Board of Finance and Economics, Discussion Series. Hoffmann-Burchardi, Ulrike (2001). Clustering of Initial Public Offering, Information Revelation and Underpricing, European Economic Review. 45(2) 353-83. Ibbotson, Roger G. and Jeffrey F. Jaffe (1975). Hot Issue Markets, Journal of Finance, 30, 1027-1042. Ibbotson, Roger G., Jody L. Sindelar, and Jay R. Ritter (1988). Initial Public Offerings, Journal of Applied Corporate Finance, 1, 37-45. Ibbotson, Roger G., Jody L. Sindelar, and Jay R. Ritter (1994). The Markets Problems with the Pricing of Initial Public Offerings, Journal of Applied Corporate Finance, 7(1), 66-74. International Monetary Fund (2008), Global Financial Stability Report, October, Washington D.C. International Country Risk Guide (ICRG) database, Various Issues Jain, Bharat A., Kini, Omesh (1994). The Post Issue Operating Performance of IPO Firms, Journal of Finance; 49(5), 1699-1726. Lowry, Michelle and G. William Schwert (2002). IPO Market Cycles: Bubbles or Sequential Learning, Journal of Finance, 57, 1171-1200. National Stock Exchange database (India), Various Issues Perron, P (1993). Erratum - The Great Crash, the Oil Price Shock and the Unit Root Hypothesis, Econometrica, 61(1), 248-49. Ritter, Jay R. (1984). The Hot Issue Market of 1980, Journal of Business, 57(2), 215-240. Ritter, Jay R (1991). The Long Run Performance of Initial Public Offerings, Journal of Finance, 46(1), 327. Shah, Ajay (1995). The Indian IPO Market: Empirical Facts and Technical Report, Centre for Monitoring Indian Economy, Mimeo Shleifer, Andrei, and Daniel Wolfenzon (2002). Investor Protection and Equity Markets, Journal of Financial Economics 66, 3-27. Stulz, Ren M. (2009). Securities Laws, Disclosure, and National Capital Markets in the Age of Financial Globalization, Journal of Accounting Research 47, 349-390. WDI database published by World Bank. Various Issues World Federation of Stock Exchanges (WFSE), Various Issues

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Part-I Year 2004 2005 2006 2007 2008 2009 2010 Total Part-II 2004 2005 2006 2007 2008 2009 2010 Total Part-I Countries US China Europe India Middle East and Africa Total of top 5 Rest of the World Total of all countries Part-II US China Europe India Middle East and Africa Total of top 5

Table-1: The IPO sample: 2004 to 2010 IPO Numbers All IPOs Domestic IPOs 1529 1297 1473 1223 1679 1850 884 695 1516 9626 IPO Proceeds $133.8 $149.4 $223.7 $278.6 $111.5 $115.0 $355.0 $1367.0 1314 1116 587 502 989 7028 $62.2 $82.6 $121.6 $89.9 $63.3 $73.0 $227.0 $719.6

Global IPOs 232 250 365 734 297 193 527 2598 $71.6 $66.8 $102.1 $188.7 $48.2 $42.0 $128.0 $647.4

Table-2: IPO activity for the top 5 countries around the world: 2004 to 2010 IPO Numbers All IPOs Domestic IPOs Global IPOs 1151 1238 2409 366 479 5643 3983 9626 IPO Proceeds $285 $351 $361 $36 $53 $1086 846 935 1976 348 413 4518 2510 7028 305 303 433 18 66 1125 1473 2598

$149 $207 $234 $21 $37 $648

$136 $144 $127 $15 $16 $438

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Research Journal of Finance and Accounting ISSN 2222-1697 (Paper) ISSN 2222-2847 (Online) Vol 2, No 4, 2011 Rest of the World $281 Total of all countries $1367

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$71.6 $719.6

$209.4 $647.4

Variables V1 V2 V3 V4 V5 V6 V7 V8 V9 V10 V11 V12 V13 V14 V15 V16 V17 V18 V19 V20 V21 V22 V23 V24

Mean 47.92 45.70 3.68 0.15 0.24 0.74 0.11 2.49 0.20 0.30 3.44 0.48 0.62 0.48 0.51 0.48 73.49 0.76 0.46 1.27 1.25 0.59 0.58 8.88

Table-3: Descriptive Statistics Median S.D. 49.28 26.63 44.59 20.76 3.73 0.15 0.24 0.73 0.11 1.16 0.15 0.00 3.50 0.44 0.58 0.44 0.55 0.46 75.68 0.86 0.51 1.29 1.26 0.43 0.48 9.28 0.23 0.003 0.004 0.03 0.01 2.85 0.18 0.46 1.12 0.24 0.21 0.25 0.22 0.23 11.62 0.92 0.13 0.19 0.00 0.52 0.49 1.38

1st Quartile 25.00 32.82 3.71 0.15 0.24 0.73 0.12 0.35 0.07 0.00 3.00 0.29 0.50 0.22 0.33 0.35 66.07 -0.01 0.39 1.18 1.26 0.22 0.23 7.97

3rd Quartile 69.61 57.46 3.75 0.15 0.24 0.74 0.12 3.88 0.26 1.00 4.00 0.64 0.75 0.66 0.67 0.61 83.52 1.64 0.56 1.36 1.26 0.82 0.72 10.13

Table-4: Global IPO numbers scaled by total number of IPOs C Common law 4.31 (0.30) -6.27** (-1.08) -1.10*** Anti-director Anti-self dealing 6.34 (0.06) -16.05** (-1.52) -2.97*** Disclosure Burden of proof -0.07 (-0.001) -8.28 (-1.22) -2.80***

Constant Institutions variable Domestic IPO rate

-5.65 (-0.47) -2.148

13.93 (2.04) 4.78*** (-1.18) -2.34***

11.55 (0.89) -21.52*** (-1.33) -1.64***

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Research Journal of Finance and Accounting ISSN 2222-1697 (Paper) ISSN 2222-2847 (Online) Vol 2, No 4, 2011 (-4.26) (-2.89 World domestic IPO rate 0.687 0.20** (0.98) (1.87) World global IPO rate 7.624 8.24*** (1.89) (2.03) Country q 4.231 1.76 (0.76) (0.34) Global q 6.723 1.34 (0.34) (0.57) Market cap / GDP -3.684 0.16 (-0.94) (0.01) Market turnover -4.874 -3.37*** (-1.63) (-1.04) Log (GDP / capita) 1.986 1.34 (1.08) (0.25) Number of observations 200
Adjusted R2 0.2127

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(-3.27) 1.32** (2.32) 3.71*** (2.40) 0.57 (0.34) 7.494 (0.37) 0.31 (0.17) -3.11** (-1.39) 2.28 (0.66) 200 0.3258

(-3.26) 1.18** (0.04) 3.15*** (1.26) 2.21 (0.60) 4.54 (0.27) -0.32 (-0.01) -3.59** (-1.05) 2.92 (1.03) 200 0.2036

(-2.94) 0.56* (0.79) 0.610** (1.03) 2.90 (0.64) 3.04 (0.31) 2.86 (1.01) -3.35*** (-1.87) 0.99 (0.65) 200 0.2697

(-3.16) 0.86* (1.77) 6.75*** (1.88) 6.22 (1.07) 4.33 (0.07) -0.68 (-0.27) -3.98*** (-2.07) 3.43** (1.07) 200 0.2438

Table-5: Global IPO proceeds scaled by total IPOs proceeds Common law -8.67 (-0.37) -6.33* (-1.37) -7.46*** (-2.85) 6.42 (0.35) 34.76** (1.19) -2.52 (-0.60) 23.66* (1.00) 3.67 (1.04) -7.28*** (-3.11) 0.85 (0.49) 200 Anti-director -3.76 (-0.19) -2.16* (-0.92) -6.76*** (-2.14) 7.34 (0.81) 36.33** (1.32) -4.77 (-1.06) 25.43** (1.15) 1.35 (0.52) -6.24** (-2.37) 0.58 (0.86) 200 Anti-self dealing -8.06 (-0.68) -7.97* (-1.15) -9.64*** (-1.84) 8.06 (0.27) 34.73** (2.36) -0.67 (-0.18) 31.78** (1.05) 2.13 (0.27) -7.20** (-4.85) 1.71 (0.85) 200 Disclosure 4.99 (0.19) -22.88*** (-3.99) -10.24*** (-4.24) 7.84 (0.41) 20.87* (1.71) -5.257 (-0.94) 25.34* (2.00) 8.95** (2.24) -8.82*** (-5.36) 1.13 (0.69) 200 Burden of proof -9.62 (-0.79) -6.31 (-1.10) -8.37** (-4.53) 8.97 (0.62) 31.97* (1.99) -2.866 (-0.48) 43.550* (1.99) 3.38 (0.83) -9.60*** (-6.30) 2.34 (1.38) 200

Constant Institutions variable Domestic IPO rate World domestic IPO rate World global IPO rate Country q Global q Market cap / GDP Market turnover Log (GDP / capita) Number of observations

-13.59 (-0.61) -6.87*** (-2.82) 4.11 (0.05) 37.85*** (1.81) -2.17 (-0.72) 20.06* (1.06) 0.22 (0.002) -5.73*** (-4.19) 1.81* (1.10) 200

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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 enforce 1.628 (0.04) -12.291 (-0.73) -3.888*** (-6.43) 1.001* (1.72) 12.064*** (3.02) 8.875 (1.28) 6.975 (0.27) -1.660 (-0.39) -7.380*** (-3.12) 3.540* (1.79) 200 0.2593 Investor protection 11.187 (0.30) -24.561** (-2.44) -3.751*** (-6.56) 1.061* (1.85) 11.675*** (2.86) 8.566 (1.28) 5.207 (0.21) 0.869 (0.22) -7.347*** (-3.14) 3.201* (1.76) 200 0.2729 Political risk -6.444 (-0.20) 0.163 (0.45) -3.362*** (-6.33) 1.159** (2.06) 14.209*** (3.53) 6.551 (1.06) 9.250 (0.40) -5.200 (-1.22) -6.007** (-2.20) 2.303 (0.65) 200 0.2353 Rule of law -33.104 (-0.91) -6.962 (-1.67) -3.199*** (-5.57) 1.284** (2.27) 12.351*** (3.03) 8.102 (1.35) 5.372 (0.23) -5.278 (-1.34) -6.910** (-2.61) 7.761** (2.54) 200 0.2444 Ownership -85.898** (-2.43) 97.302*** (6.14) -3.429* (-6.12) 1.334** (2.36) 11.270*** (2.89) 9.748 (1.54) 0.708 (0.03) -2.182 (-0.65) -0.297 (-0.15) 7.670*** (5.11) 200 0.3369

Constant Institutions variable Domestic IPO rate World domestic IPO rate World global IPO rate Country q Global q Market cap / GDP Market turnover Log (GDP / capita) Number of observations Adjusted R2

Table-7: Global IPO proceeds scaled by total IPOs proceeds Public Investor Political Rule of enforce protection risk law Constant -29.327 -17.083 -22.337 -67.968* (-0.89) (-0.56) (-0.78) (-2.00) Institutions variable -2.972 -18.615** -0.264 -8.643** (-0.20) (-2.06) (-0.74) (-2.45) Domestic IPO rate -18.71*** -17.52*** -16.59*** -15.01*** (-4.20) (-4.37) (-4.24) (-3.84)

Ownership -102.1*** (-3.08) 78.190*** (5.26) -17.27*** (-4.32)

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Research Journal of Finance and Accounting ISSN 2222-1697 (Paper) ISSN 2222-2847 (Online) Vol 2, No 4, 2011 World domestic IPO rate 12.431 10.360 (0.65) (0.55) World global IPO rate 46.194** 43.244* (2.07) (1.93) Country q -2.595 -2.780 (-0.42) (-0.46) Global q 43.682* 44.084* (1.96) (1.98) Market cap / GDP 2.272 5.003 (0.54) (1.21) Market turnover -9.964*** -10.05*** (-5.99) (-6.32) Log (GDP / capita) 2.389 1.741 (1.37) (1.02) Number of observations 200 200 Adjusted R2 0.1234 0.1371

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14.306 (0.77) 51.947** (2.42) -3.173 (-0.57) 42.012* (2.01) 1.276 (0.34) -10.11*** (-6.44) 4.005 (1.32) 200 0.1232 11.988 (0.67) 37.874* (1.73) -2.002 (-0.36) 44.538** (2.14) 0.740 (0.20) -10.99*** (-6.38) 7.550*** (2.89) 200 0.1402 11.894 (0.65) 32.786 (1.49) -1.034 (-0.20) 47.743** (2.02) 3.114 (1.07) -4.312** (-2.43) 5.238*** (3.85) 200 0.1958

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-8: Global IPO numbers scaled by total number IPOs Common Anti-director Anti-self law dealing Constant -3.395 21.830 53.654 27.043 (-0.10) (0.64) (1.59) (0.78) Post 2008 -7.851** -27.435*** 13.126** (-2.49) (-3.05) (-2.34) *** *** *** Institutions variable -20.947 -10.628 -35.028 (-2.82) (-3.37) (-2.98) Institutions*Post 2008 -2.224 9.011 6.188** 16.149* (-0.68) (1.55) (2.58) (1.77) Domestic IPO rate -3.326*** -3.066*** -3.366*** -2.960*** (-5.92) (-5.91) (-7.51) (-5.26) World domestic IPO 0.769 0.599 0.656 0.617 rate (1.27) (1.03) (1.12) (1.04) World global IPO rate 13.751 13.555*** 14.400*** 13.782*** (3.44) (3.40) (3.61) (3.46) Country q 6.962 6.421 2.555 4.960 (1.17) (1.02) (0.44) (0.76) Global q 0.227 2.853 5.918 3.698 (0.32) (0.12) (0.26) (0.16) Market cap / GDP -5.327 0.718 0.973 0.266

Disclosure 16.258 (0.54) -4.234** (-1.84) -19.547*** (-2.01) 8.564 (1.14) -2.952*** (-4.57) 0.847 (0.875) 11.247*** (2.54) 5.986 (0.99) 2.367 (0.07) 0.652

Burden of proof 23.547 (0.82) -12.314** (-2.13) *** -32.658 (-1.84) 12.569* (1.24) -2.058*** (-4.35) 0.554 (0.93) 10.548*** (2.64) 3.621 (0.67) 2.687 (0.14) 0.326

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Research Journal of Finance and Accounting ISSN 2222-1697 (Paper) ISSN 2222-2847 (Online) Vol 2, No 4, 2011 (-1.26) (0.17) Market turnover -6.620 -7.534*** (-2.49) (-2.78) Log (GDP / capita) 3.937 2.343 (1.97) (1.25) Number of observations 200 200
Adjusted R2 0.2383 0.2701

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(0.24) -6.434** (-2.41) 2.330 (1.30) 200 0.2788

(0.06) -6.437** (-2.42) 2,964 (1.41) 200 0.2584

(0.14) -6.884*** (-2.41) 2.008 (0.87) 200 .02601

(0.09) -4.875** (-1.88) 2.669 (1.08) 200 0.2487

Table-9: Global IPO proceeds scaled by total IPOs proceeds Common law -31.24 (-0.96) -2.087 (-0.12) -11.57*** (-3.89) 11.258 (0.52) 41.697** (1.98) -3.024 (-0.48) 38.635* (1.25) -7.227 (1.68) -14.358*** (-4.24) 2.658 (0.68) -10.005*** (-3.88) 2.304 (1.21) 200 0.1189 Anti-director -9.67 (-0.50) -15.355** (-1.67) -14.237*** (-3.66) 9.689 (0.47) 37.589* (0.88) -2.054 (-0.56) 40.214* (1.34) -6.247 (1.54) -5.24*** (-2.17) 4.854 (0.87) -9.36*** (-4.96) 1.587 (1.26) 200 0.1293 Anti-self dealing -15.36 (-0.58) -0.305 (-0.85) -14.35*** (-3.99) 11.658 (0.68) 46.357** (2.04) -4.001 (-0.66) 39.231* (1.74) 2.441 (0.56) -8.269*** (-4.221) 1.200 (0.30) -9.621*** (-5.32) 5.005 (1.04) 200 0.1249 Disclosure -45.26* (-1.84) -7.652** (-2.13) -12.34*** (-3.02) 9.657 (0.63) 32.547* (1.24) -1.884 (-0.29) 41.366** (1.83) 1.114 (0.58) -2.356*** (-1.87) 0.652 (0.18) -9.682*** (-5.47) 6.895*** (2.47) 200 0.1357 Burden of proof -98.32*** (-2.77) 74.585*** (4.98) -15.86*** (-3.65) 10.352 (0.70) 30.643 (1.18) -1.147 (-0.26) 44.698** (1.84) 3.294 (1.86) -4.323** (-3.54) 4.021 (1.21) -3.654** (-2.04) 4.265*** (3.12) 200 0.1827

Constant Post 2008 Institutions variable Institutions*Post 2008 Domestic IPO rate World domestic IPO rate World global IPO rate Country q Global q Market cap / GDP Market turnover Log (GDP / capita) Number of observations Adjusted R2

-2.882 (-0.17) -1.995 (-0.54) -2.874*** (-4.34) 0.557 (1.03) 10.258 (2.65) -6.107 (1.14) 1.684 (-0.89) 4.772 (0.98) 0.234 (0.27) 3.004 (1.46) 200 0.2187

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.

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Public enforce 0.63 (0.04) -12.291 (-0.73) -3.888*** (-6.43) 1.001* (1.72) 12.064*** (3.02) 8.875 (1.28) 6.975 (0.27) -1.660 (-0.39) -7.380*** (-3.12) 3.540* (1.79) -7.534*** (-2.78) 2.343 (1.25) 200 0.2593 Investor protection 9.19 (0.30) -24.561** (-2.44) -3.751*** (-6.56) 1.061* (1.85) 11.675*** (2.86) 8.566 (1.28) 5.207 (0.21) 0.869 (0.22) -7.347*** (-3.14) 3.201* (1.76) -6.434** (-2.41) 2.330 (1.30) 200 0.2729 Political risk -6.44 (-0.20) 0.163 (0.45) -3.362*** (-6.33) 1.159** (2.06) 14.209*** (3.53) 6.551 (1.06) 9.250 (0.40) -5.200 (-1.22) -6.007** (-2.20) 2.303 (0.65) -6.437** (-2.42) 2,964 (1.41) 200 0.2353

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Constant Post 2008 Institutions variable Institutions*Post 2008 Domestic IPO rate World domestic IPO rate World global IPO rate Country q Global q Market cap / GDP Market turnover Log (GDP / capita) Number of observations Adjusted R2

Rule of law 27.11 (-0.91) -6.962 (-1.67) -3.199*** (-5.57) 1.284** (2.27) 12.351*** (3.03) 8.102 (1.35) 5.372 (0.23) -5.278 (-1.34) -6.910** (-2.61) 7.761** (2.54) -6.884*** (-2.41) 2.008 (0.87) 200 0.2444

Ownership -66.55** (-2.43) 97.302*** (6.14) -3.429* (-6.12) 1.334** (2.36) 11.270*** (2.89) 9.748 (1.54) 0.708 (0.03) -2.182 (-0.65) -0.297 (-0.15) 7.670*** (5.11) -4.875** (-1.88) 2.669 (1.08) 200 0.3369

Table-11: Global IPO proceeds scaled by total IPOs proceeds Public enforce -27.88 (-0.74) -10.441 (-0.84) -2.972 (-0.20) 1.744* (2.03) -18.71*** Investor protection -12.96 (-0.73) -20.354** (-3.01) -18.615** (-2.06) 1.547* (1.48) -17.52*** Political risk -16.84 (-0.86) 0.185 (0.38) -0.264 (-0.74) 1.421** (1.84) -16.59*** Rule of law -44.57* (-2.31) -5.324 (-2.00) -8.643** (-2.45) 1.567** (1.97) -15.01*** Ownership -94.57*** (-2.83) 84.117*** (5.88) 78.190*** (5.26) 1.402** (2.71) -17.27***

Constant Post 2008 Institutions variable Institutions*Post 2008 Domestic IPO rate

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Research Journal of Finance and Accounting ISSN 2222-1697 (Paper) ISSN 2222-2847 (Online) Vol 2, No 4, 2011 (-4.20) (-4.37) World domestic IPO rate 11.245 12.547 (0.92) (0.62) World global IPO rate 46.194** 43.244* (2.07) (1.93) Country q -2.595 -2.780 (-0.42) (-0.46) Global q 43.682* 44.084* (1.96) (1.98) Market cap / GDP 2.272 5.003 (0.54) (1.21) Market turnover -7.659*** -9.566*** (-4.89) (-6.02) Log (GDP / capita) 1.875 1.563 (1.42) (1.57) Number of observations 200 200
Adjusted R2 0.1206 0.1302

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(-4.24) 13.257 (0.82) 51.947** (2.42) -3.173 (-0.57) 42.012* (2.01) 1.276 (0.34) -12.474*** (-5.87) 3.954 (0.99) 200 0.1189

(-3.84) 9.568 (0.59) 37.874* (1.73) -2.002 (-0.36) 44.538** (2.14) 0.740 (0.20) -13.252*** (-5.62) 6.239*** (3.02) 200 0.1384

(-4.32) 16.004 (0.87) 32.786 (1.49) -1.034 (-0.20) 47.743** (2.02) 3.114 (1.07) -3.896** (-2.85) 5.008*** (3.21) 200 0.1844

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.

Appendix-1 Meaning of the Variables Derivation Number of global IPOs in country j in year t / Total number of IPOs in country j in year t and is multiplied by 100 Increase in Global IPO proceeds in country j in year t / Total IPO proceeds 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) World domestic IPO rate (total Total world domestic IPO proceeds in year t / Total worldwide GDP in year tdomestic proceeds) (V5) 1 and is multiplied by 100 (Total world domestic IPO proceeds include proceeds raised in domestic IPOs and the domestic component of global IPOs. To compute the world domestic IPO rate for country j, IPO proceeds and GDP for country j are excluded from the calculation) World global IPO rate (based on Total world global IPO numbers in year t / Total number of domestic listed numbers) (V6) firms worldwide in year t-1 and is multiplied by 100 (To compute the world Variables Global IPO number / Total number of IPOs (V1) Global IPO proceeds / Total IPO proceeds (V2)

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Research Journal of Finance and Accounting www.iiste.org ISSN 2222-1697 (Paper) ISSN 2222-2847 (Online) Vol 2, No 4, 2011 global IPO rate for country j, global IPOs and the number of domestic listed firms for country j are excluded from the calculation) World global IPO rate (based on Total world global IPO proceeds in year t / Total proceeds of domestic listed proceeds) (V7) firms worldwide in year t-1 and is multiplied by 100 (To compute the world global IPO rate for country j, global IPOs and proceed of domestic listed firms for country j are excluded from the calculation) Domestic IPO rate (based on counts) Number of Lagged domestic IPO / Number of Lagged domestic firms and is (V8) multiplied by 100 Domestic IPO rate (based on total Lagged domestic IPO proceeds / Lagged GDP and is multiplied by 100 (For domestic proceeds) (V9) this variable, proceeds include total domestic proceeds, including proceeds raised in domestic IPOs and the domestic component of global IPOs) Post 2008 (Dummy Variable) Equals one from 2004 to 2010; or zero otherwise. Common law (V10) Equals one, if a countrys origin of commercial law is English common law; or zero otherwise. Anti-director (V11) The index is formed by summing up of: (1) vote by mail; (2) shares not deposited; (3) cumulative voting; (4) oppressed minority; (5) pre-emptive rights; and (6) capital to call a meeting (Ranges from zero to six.) Anti-self dealing (V12) Average of ex ante and ex post private control of self-dealing, where the ex ante is average of approval by disinterested shareholders and ex ante disclosure, the ex post is he average of disclosure in periodic filings and ease of proving wrongdoing (Ranges from zero to one.) Disclosure (V13) Arithmetic mean of (1) prospectus; (2) compensation; (3) shareholders; (4) inside ownership; (5) contracts irregular; and (6) transactions (Ranges from zero to one.) Burden of proof (V14) Arithmetic mean of (1) liability standard for the issuer and its directors; (2) liability standard for distributors; and (3) liability standard for accountants (Ranges from zero to one) Public enforcement (V15) Arithmetic mean of (1) supervisor characteristics index; (2) rule-making power index; (3) investigative powers index; (4) orders index; and (5) criminal index (Ranges from zero to one.) Investor protection (V16) Principal component of disclosure, burden of proof, and anti-director rights (Ranges from zero to one) Political risk (V17) Includes 12 weighted variables covering both political and social attributes (Ranges from zero to 100) Rule of law (V18) Captures perceptions of the extent to which agents have confidence in and abide by the rules of society, and in particular the quality of contract enforcement, property rights, the police and the courts, as well as the likelihood of crime and violence (Ranges from -1.6753 to 2.0431) Ownership (V19) Average percentage of common shares owned by the top three shareholders in the 10 largest non-financial and privately-owned domestic firms in a given country. Country q (V20) For each firm in country j, q is computed annually as Total assets less book value of equity plus market value of equity / Book value of total assets (all variables in local currency) (For each country, median industry of qs are computed annually using the Fama-French 17 industry classification scheme. The industry of qs are then weighted by their relative market values in each year so that country q becomes the market value of the weighted average median industry qs) Global q (V21) For each firm in country j, q is computed annually as Total assets less book value of equity plus market value of equity / Book value of total assets (all variables are computed in local currency). (Median of global industry qs are computed across all firms worldwide using the Fama-French 17 industry classification scheme. To compute global q, each global industry q is weighted by the industrys relative market value (in USD) Market Capitalization / GDP (V22) Market capitalization value of listed shares / GDP 122

Research Journal of Finance and Accounting www.iiste.org ISSN 2222-1697 (Paper) ISSN 2222-2847 (Online) Vol 2, No 4, 2011 Market turnover ratio (V23) Market value of total shares traded / Average of real market capitalization Log (GDP / capita) (V24) GDP / Population during the middle of any year. (GDP is at current USD) Source: SDC and WDI database and DLLS (2008)

Fig. 1

Source:Dealogic, Thomson Financial, Ernst & Young Fig. 2

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Source: Dealogic, Thomson Financial, Ernst & Young

Fig. 3

Source:Dealogic, Thomson Financial, Ernst & Young Fig. 4

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Source:Dealogic, Thomson Financial, Ernst & Young Fig. 5

Source:Dealogic, Thomson Financial, Ernst & Young Fig. 6

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