Cross-Border Equity Listing and Issuance The current wave of interest in cross-border listings on major world exchanges is not a chance phenomenon. Evidence suggests that issuers seek cross-border listings to broaden their shareholder base, promote awareness of their products, and/or build public awareness of the company, particularly in countries where the company has significant operations and/or major customers.
National regulators and stock exchanges compete fiercely for foreign listings and trade volume, considered necessary for any stock exchange that seeks to become or remain a global leader. In response, organized exchanges and market regulators have worked to make access faster and less costly for foreign issuers and at the same time increase their markets’ credibility. As capital markets become more specialized, each can offer unique benefits to foreign issuers.
Many companies have difficulty deciding where to raise capital or list their shares. Knowledge of many equity markets with different laws, regulations, and institutional features is now required. Also required is an understanding of how issuer and stock exchange characteristics interact. The issuer’s home country, industry, and offering size are just some of the factors that need to be considered.13 In addition, the costs and benefits of different market combinations need to be understood. One entrepreneur planning to raise capital said, “I spoke to three investment banks about it, and I had three different answers about which would be the right market for me.” Exhibit 1-8 presents a detailed list of factors companies consider in choosing a foreign capital market.14
The pace of change in the world’s capital markets show no signs of slowing. One example is the growing importance of stock exchange alliances and consolidation. In a strategic move, the New York Stock Exchange acquired Euro next, the pan-European stock exchange created by a merger of the Amsterdam, Brussels, Lisbon, and Paris exchanges. This business combination creates the world’s first trans-Atlantic stock market. Some are even predicting that financial markets and trading will be dominated by two or three global exchange groups operating across continents within the not too distant future.15
This will increase significantly the exposure of international investors to international companies. Similarly, the emergence of newer markets, such as London’s Alternative Investment Market (AIM), France’s alter next and Germany’s Entry Standard, expands the pool of companies that can now break the bonds of local debt financing. All of these developments present a highly complex setting for financial reporting regulation.
