Do U.S. firms fly higher when bypassing the U.S. capital markets? An investigation of the short-term performance of foreign IPOs

This paper investigates the performance of U.S. firms that partake in a foreign IPO – bypassing their domestic exchanges and raising their equity in a foreign market. The globalization of equity markets along with the increased regulations to financial markets in the U.S. has potentially led to the U.S. losing its title as the premier listing market. Using a sample of 77 U.S. based firms that totally bypassed the U.S. equity markets in their capital(equity) raising activities we are able to investigate the performance of this unique sample of firms. This investigation contributes to the literature by finding that U.S. firms which bypassed the U.S. market experienced less underpricing compared with U.S. only IPOs. We alsotest the window of opportunity and prestigious underwriter IPO hypotheses on our unique data set and find statistical evidence supporting the former hypothesis yet no statistical evidence confirming the latter hypothesis.