The Initial Public Offerings of Foreign Companies in U.S.

Abstract

In this paper, I examine the initial public offerings (IPOs) of foreign companies in U.S.. The paper is divided into two parts. In part I, I discuss why foreign companies seek listings in the United States (U.S.) stock markets, the regulations and requirements for their listings, and the costs involved. I also take a close look at the listings of Canadian companies in the U.S. markets. In part II, a sample of 108 foreign companies' IPOs in the U.S. during the 1977- 1988 period is analyzed. The underpricing of these IPOs is examined and compared to that of U.S. companies' IPOs. In addition, I set up a multiple regression model to test the relationship between the initial returns on these foreign new issues and different variables which proxy for ex ante uncertainty. The results of this study can provide investors some insights on the performance of foreign companies' IPOs.