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How cost-effective are Canadian IPO markets?

Author

Listed:
  • Jean-Marc Suret
  • Maher Kooli

Abstract

The purpose of this paper is to shed some light on the costs associated with initial public offerings (IPOs), and this is performed by undertaking a large sample of Canadian and United States IPOs. More specifically, we gather information in the universe of firm-commitment and best-effort IPOs in Canada and in the United States, from 1997 to 1999, and measure their direct and indirect costs. Overall, we are able to confirm that the Canadian market is superior to its U.S. counterpart in terms of IPO costs. In other words, do Canadian firms have access to equity capital on a competitive basis in comparison with U.S. firms. However, we confirm that the going public process is costly, particularly for small firms. L'objectif de cette étude est l'analyse des divers coûts associés aux émissions initiales d'actions canadiennes. Elle repose sur l'analyse comparée d'échantillons importants d'émissions américaines et canadiennes. Nous avons étudié l'ensemble des émissions de la période 1997-1999, et seules ont été omises les émissions pour lesquelles l'information requise n'était pas disponible. Les coûts directs et indirects ont été estimés. Le marché canadien présente un avantage net par rapport au marché américain en ce qui concerne les coûts d'émission des entreprises de petite taille. Les coûts sont semblables pour les émissions de grande taille. Dans les deux pays, le processus d'émission reste onéreux, notamment pour les émissions d'un montant peu élevé mais nos résultats contredisent l'argument voulant qu'en raison de la structure provinciale de sa réglementation, le marché canadien soit moins attrayant que celui des États-Unis pour l'obtention de capital.

Suggested Citation

  • Jean-Marc Suret & Maher Kooli, 2002. "How cost-effective are Canadian IPO markets?," CIRANO Working Papers 2002s-83, CIRANO.
    • Handle: RePEc:cir:cirwor:2002s-83
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    File URL: https://cirano.qc.ca/files/publications/2002s-83.pdf
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    References listed on IDEAS

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    1. Hsuan‐Chi Chen & Jay R. Ritter, 2000. "The Seven Percent Solution," Journal of Finance, American Finance Association, vol. 55(3), pages 1105-1131, June.
    2. Alexander P. Ljungqvist & William J. Wilhelm, 1999. "The Seven Percent Solution? An International Perspective on Underwriting Spreads," OFRC Working Papers Series 1999fe11, Oxford Financial Research Centre.
    3. Ritter, Jay R., 1987. "The costs of going public," Journal of Financial Economics, Elsevier, vol. 19(2), pages 269-281, December.
    4. Shane A. Corwin & Jeffrey H. Harris, 2001. "The Initial Listing Decisions of Firms that Go Public," Financial Management, Financial Management Association, vol. 30(1), Spring.
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    Cited by:

    1. Agathee, Ushad Subadar & Sannassee, Raja Vinesh & Brooks, Chris, 2012. "The underpricing of IPOs on the Stock Exchange of Mauritius," Research in International Business and Finance, Elsevier, vol. 26(2), pages 281-303.
    2. Bamidele M. Ilo, 2015. "The Projected Utilization of Initial Public Offer (IPO) Proceeds in Nigeria," Acta Universitatis Danubius. OEconomica, Danubius University of Galati, issue 11(4), pages 72-85, August.
    3. Ranajit Kumar Bairagi & William Dimovski, 2012. "The direct costs of raising external equity capital for US REIT IPOs," Journal of Property Investment & Finance, Emerald Group Publishing Limited, vol. 30(6), pages 538-562, September.

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    More about this item

    Keywords

    Initial Public Offering; directs costs; indirect costs; Canada; US.; Premier appel public à l'épargne; coûts directs; coûts indirects; Canada; États-Unis.;
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