World Markets for Raising New Capital

Financial markets are increasingly integrated globally. We examine the extent to which firms from different countries rely on alternative sources of capital, the locations where they raise capital, and the factors that affect these choices. During the 1990-2001 period, firms raised about $25.9 trillion of new capital, including $4.7 trillion from abroad. International debt issuances are substantially more common than equity, accounting for over 90% of the international security issues, and about 20% of all public debt issues. In contrast, international equity issues account for about 4.4% of all international security issues, and about 6% of all equity issues during our sample period. Market timing considerations appear to be very important in security issuance decisions. Firms all around the world are more likely to issue equity prior to periods of low market returns. Most of the cross-border equity is issued in the U.S. and the U.K., and these issues tend to occur in 'hot' markets and prior to relatively low market returns. Finally, firms issue more debt when interest rates are lower, and issue debt overseas when interest rates in the place of issue are lower than they are at home.