سفر به امریکا : IPOs از صادر کنندگان بازار در حال ظهور

We compare the issue costs of 299 companies from emerging and developed market countries making initial public offerings (IPOs) in the United States between 1991 and 2001. Our results indicate that IPOs from emerging markets experience the same costs on average as IPOs from developed market countries. Although there is a large gap between the country risk ratings of the emerging and developed market countries, IPO issuers from emerging markets appear to bridge that gap by being large issuers in their respective home countries, listing more frequently on the NYSE, and having a greater proportion of activity in manufacture and infrastructure segments, and a lower proportion in high-tech segments. These issues occur following periods of strong U.S. and home market equity performance which helps to alleviate country risk. In comparison to their developed market peers, emerging market issuers are a select group of higher-quality firms.

Since 1990, a number of companies from emerging countries have gone public — raising equity for the first time anywhere — by issuing in the United States. The sheer volume of these initial public offers (IPOs) invites an examination of foreign entry into U.S. capital markets: Is entry frictionless for all foreign entrants, or do the U.S. equity markets impose barriers to entrants from emerging market countries in the form of higher issue costs or entry requirements? While the entry of foreign issuers into the U.S. equity market has garnered research attention, no study has examined the characteristics and costs of firms from emerging markets raising capital for the first time in the U.S. as compared to those from developed countries. Studies to date have examined the effect of a U.S. listing or a U.S. capital-raising event on an international firm's stock returns (e.g., Foerster and Karolyi, 1999, Karolyi, 1998, Miller, 1999 and Errunza and Miller, 2000). These studies have compared the costs and benefits of foreign firms raising capital in the U.S. relative to raising capital in their home markets.3Bruner et al. (2004) (BCR) compared the costs and benefits of foreign firms' going public in the U.S. to domestic U.S. firms going public. They found that foreign issuers experience equivalent issue costs compared to U.S. IPO issuers. Though this might seem consistent with the ideal of a frictionless market for global capital, BCR found that foreign issuers were of higher quality than U.S. domestic issuers on a number of dimensions, suggesting highly selective entry into U.S. capital markets. In this regard, issuers from emerging markets merit particular attention. A combination of information asymmetry (e.g., perhaps due to greater cultural differences or less analyst following) and higher country risk (observed in higher volatilities and yield premiums for emerging market securities) are at least two explanations why U.S. investors might discriminate among issuers from emerging and developed markets. Merton (1987) argues that markets can be segmented by information if investors purchase only the securities of firms they know. If firms from emerging markets are less well known to U.S. investors, all else equal, theory would suggest they face increased capital raising costs. Forty-six percent of the foreign U.S. IPOs originate from emerging market countries that are associated with high country risk. High country risk is symptomatic of differences in language, culture, and institutions that contribute to a lack of familiarity on the part of U.S. investors (see Coval and Moskowitz, 2001, Grinblatt and Keloharju, 2001 and Sarkissian and Schill, 2004). Further, the same factors could also hinder the efforts of emerging market IPO issuers to generate institutional following and comparable analyst coverage relative to developed market IPOs. The extent to which emerging market IPO issuers are less well known and possibly face higher issue costs relative to developed market IPO issuers is the central focus of our investigation. Are the entrants from emerging markets different from those from developed markets? In particular, is it more costly for emerging market issuers to enter the U.S.? This study extends findings of Bruner et al. (2004) in at least two dimensions. First, it profiles the emerging market IPO issues and issuers — these have not previously been described in the literature and offer important insights on the “carriage trade” of the U.S. equity markets in financing emerging market firms. Second, it compares the costs of equity issuance between samples of emerging market and developed market issuers. In equilibrium, emerging market firms will come to the U.S. only if the costs of issuing in the U.S. are equal to or less than the costs of issuing in their respective home markets. However, especially among the least developed emerging markets, one suspects that issuers will find access to capital severely limited in their home markets, and therefore prohibitively expensive. Hence, issuers from these countries likely have incentives to issue in the U.S. Existing studies of U.S. investors' reaction to issuances by foreign firms are primarily based on studies of American Depositary Receipt (ADR) issues (for a review see Miller, 1999, Foerster and Karolyi, 1999 and Karolyi, 1998). A key difference between our study and earlier studies is that our foreign issuers are not listed on any exchange prior to their U.S. IPO. For our sample firms, the U.S. IPO is their first public issue in any market. By contrast, the samples used in previous studies that examine ADR issues or U.S. exchange listings by foreign firms typically include a significant portion of firms already listed in their home market. Because our firms are not listed on any exchange prior to their U.S. IPO, they have neither an established investor following in their home market nor a prior trading history to facilitate the pricing of the U.S. offer. Relative to previous studies, our sample represents purer-plays with respect to U.S. investors' lack of familiarity with an issuer. Accordingly, first time IPOs by emerging market firms should be particularly revealing of the entry costs into new markets and the possibility of market segmentation. A total of 299 foreign firms from 40 countries made first time IPOs in the U.S. over the period 1991 to 2001. Emerging market IPOs grew from two offers in 1991 to a high of 34 offers in 1996. Over the entire period, issuers from emerging market countries raised $10.4 billion compared to $18.6 billion raised by issuers from developed market countries. This suggests the emerging market issuers account for a sizeable portion – approximately 36% – of the total volume of capital raised by foreign firms through IPOs in the U.S. On a univariate basis, we find that IPOs from emerging market countries have similar underpricing (i.e., the percentage difference between the first day closing price and the offer price) and gross spreads on average relative to developed market IPOs. Similarly, regression analysis confirms, when all factors are held constant, IPOs from emerging markets experience underpricing that is insignificantly different compared to IPOs from developed markets. Given the evidence in previous studies showing that underpricing and underwriting fees are positively related to risk and information asymmetry, the absence of differences in underpricing between emerging and developed market IPOs is surprising. Yet when we compare the characteristics of emerging and developed market IPOs, we find that they differ on six dimensions that compensate for information asymmetry and risk. First, emerging market issues are significantly smaller than their developed market peers. Second, relative to the average capitalization of firms in their home country, emerging market issuers are significantly larger than those from developed countries. Third, IPOs from emerging markets are more likely to be listed on the New York Stock Exchange (NYSE) compared to developed market IPOs in the U.S. Baker et al. (1999) argue that the choice to list on the NYSE signals higher quality due to its stricter listing requirements. Fourth, the home equity market conditions for issuers from emerging markets are more buoyant than for those from developed markets. Fifth, emerging market issuers in general have more tangible “assets in place” than developed market issuers. Finally, the correlation of home market equity returns with U.S. equity returns is significantly lower for emerging market issuers than for developed market issuers. This last factor could boost demand for the shares owing to attractive portfolio diversification attributes, thereby increasing investors' interest in the issue. From a wider perspective, entry by foreign firms into the U.S. equity markets foreshadows growing global capital market integration. In a frictionless world, easy entry would result in a wide diversity of issuers on many dimensions such as size and risk. Emerging market IPOs exhibit limited diversity on a number of dimensions noted above. The selectivity that drives this lack of diversity illustrates how emerging market IPOs attempt to bridge the gap with developed market IPOs and become more broadly appealing to U.S. investors. Discussed elsewhere in the literature is the tendency of the highest-quality entities (such a sovereign borrowers) to pioneer in the integration of emerging markets into the global capital market; similarly, we see pioneering entry by higher-quality equity issuers from high risk countries.4 The remainder of this paper is organized as follows: Section 2 describes the sample data and presents information on the issue volume of first time IPOs into the U.S. originating from emerging and developed countries. Section 3 provides evidence on the country risk of the issuers and how it relates to direct and indirect issue costs. Section 4 compares the firm and issue characteristics, market conditions, analyst coverage, and industry distribution of U.S. IPOs from emerging and developed markets that have the potential to influence issue costs. Section 5 gives our conclusions.

Both the univariate and regression results suggest no significant difference in the underpricing and direct costs between emerging and developed market IPOs. Given the evidence in previous studies showing that underpricing and underwriting fees are positively related to risk and information asymmetry, the absence of differences in underpricing between emerging and developed market IPOs is surprising — particularly in light of the large difference in country risk between the samples. However, it is important to note that issuance in the U.S. is the end of the entry process into the U.S. At the beginning is a selection process by issuers and underwriters that must assess how successful an offering will be in the U.S. market. The finding of no difference in issue costs raises the possibility that emerging market IPOs have firm, issue, and market characteristics that compensate in other ways for their greater country risk. The results we report in this paper are consistent with research comparing U.S. and foreign IPOs ( BCR, 2004 ). In that paper we found evidence that foreign U.S. IPOs had characteristics that helped them bridge the gap with domestic U.S. IPOs so that when all factors were held constant there were no significant differences in issue costs between the groups. In that setting we examined foreign IPOs as a group without regard to whether they were from emerging or developed market countries. The evidence we provide here shows a more discernable degree of compensation, especially when one examines the lowest rated emerging market firms in relation to others. Since emerging market IPOs are likely to be riskier (judged by higher country risk ratings), we conclude that the lack of differences in issue costs derives from compensating features or characteristics of the firm, issue, or market that lessen investors' concerns about country risk. Emerging market IPOs have characteristics consistent with higher quality or lower risk, such as smaller issue sizes, larger relative size in their home market, and greater frequency of NYSE listings. In addition, the issuers from emerging markets tend to have more tangible assets and are less likely to be high-tech ventures which also entail greater product risk. Both emerging and developed market issuers enter the U.S. market after strong domestic and home market equity performance. This suggests that equity issuance – whether U.S., foreign, emerging or developed market – is highly dependent on strong equity market conditions. Earlier we noted that, in a frictionless world, easy entry would result in a wide diversity of issuers on many dimensions such as size and risk. But in a world of capital market friction, only those firms able to overcome these frictions find their way to new markets. Our findings are not consistent with a hypothesis of frictionless entry, but one of selective entry. Emerging market IPO issuers exhibit less diversity on the dimensions noted above that effectively compensate for their risks. Viewed from another perspective, this selectivity speaks indirectly to high costs of capital raising and barriers to entry. Many emerging market firms have incentives to issue in the U.S. but only a select few find it feasible to do so