International IPO Markets and a Foreign IPO Puzzle

Abstract

We analyze a firm’s decision to conduct initial public offerings (IPOs) internationally. Global IPOs (issuing both domestically and abroad) raise significantly more capital in the international markets than any other form of IPO. Though over eight percent of firms conducting an IPO between 1995 and 2010 choose to conduct Foreign IPO (issuing only abroad), this form of IPO fails to raise significantly more proceeds than matching IPOs with similar firm characteristics. This constitutes a “Foreign IPO Puzzle.” We consider several explanations for this puzzle. Our results are consistent with firms attempting to take advantage of hotter IPO markets, more efficient pricing, better legal environment, better opportunities for a subsequent SEO, and stronger currencies. None of these hypotheses fully explains away this puzzle.