U.S. markets seen losing ground to global competitors

U.S. markets seen losing ground to global competitors

March 26, 2008 0 Comments

(March 26, 2008) – This is a big problem. The world’s companies are increasingly avoiding the US and raising capital in other markets. Today the U.S. Chamber of Commerce’s held their second annual capital markets conference to examine the issue. You can read about it by clicking here.

The United States received only 6.9 percent of the funds raised in global initial public offerings in 2007 and did not participate in any of the top 20 global IPOs, Harvard Law School Professor Hal Scott said at the conference.In comparison, in 2000, about half of the value of global IPOs was raised in the United States.

U.S. capital markets again lost ground against global competitors last year, highlighting the need to streamline regulation and crack down on excessive securities litigation.

Also, many foreign companies in 2007 took advantage of a U.S. regulatory change that let them delist from U.S. exchanges. About 15 percent of U.S.-listed foreign companies left the U.S. markets in 2007, about three times the historical rate

The world is going through a major capital re-deployment, as investors move capital from high-cost, low-return situations to more attractive opportunities. The home of such capital market activities will enjoy major advantages over other countries. Increasingly, that is London, Hong Kong and Singapore.

This is a good but sad example of what systems theorists call path-dependence. Enron and other scandals happened for one set of reasons. That led to Sarbanes-Oxley–the small public company prevention act. That, and other issues, are driving our capital markets offshore. Problem is, these changes are hard (sometimes impossible) to reverse once they happen–a property known as hysteresis.

When it happened in the UK we called it the British disease. What will they call this?


John Rutledge


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