INTERNATIONAL EQUITY MARKETS Firms are financed with both debt and equity. Although the debt markets have been the center of activity in the international financial markets over the past three decades, there are signs that international equity capital is becoming more popular. Transaction of a foreign borrower in a domestic market in local currency is the predominant international equity activity. Foreign firms often issue new shares in foreign markets and list their stock on major stock exchanges, such as those in New York, Tokyo, or London. The purpose of foreign issues and listings is to expand the investor base in the hope of gaining access to capital markets in which the demand for shares of equity ownership is strong. A foreign firm that wants to list its shares on an exchange in the United States does so through American Depository Receipts (ADRs). These are the receipts to bank accounts that hold shares of the foreign firm’s stock in that firm’s country. The equities are actually in a foreign currency, so by holding them in a bank account and listing the receipt on the account on the American exchanges, the shares can be revalued in dollars and redivided so that the price per share is more typical of that of the U.S. equity markets ($20 to $60 per share frequently being the desired range). There was considerable growth in the 1990s in the euro-equity markets. A euro-equity issue is the simultaneous sale of a firm’s shares in several different countries, with or without listing the shares on an exchange in that country. The sales take place through investment banks. Once issued, most euro equities are listed at least on the Stock Exchange Automated Quotation System (SEAQ), the computer-screen quoting system of the International Stock Exchange (ISE) in London.
Czinkota, Michael R., Ilkka A. Ronkainen and Michael H. Moffett. Fundamentals of International Business. Mason: South-Western, 2004.