I’m indebted to Elizabeth
Olson for bringing my attention to a new study by Craig Doidge,
Andrew Karolyi, and Rene Stulz, on the subject
of the competitiveness of New York stock exchanges. (There’s a non-gated version
of the study here.)
According to the report, New York exchanges are actually just as competitive
as they always were, if not more so.
The study makes for interesting, if dry, reading. And it certainly puts in
a new light previous studies from the Committee
on Capital Markets Regulation, as well as McKinsey’s Bloomberg-Schumer
According to Doidge et al, New York is continuing to get exactly the
kinds of foreign listings that it always got. And London’s Main Market is doing
much worse than the NYSE in that respect. The only reason that London
looks as though it’s outperforming is that a lot of small companies are listing
on London’s AIM market – companies which would never have qualified for
a NYSE listing in the first place.
Look at the number of foreign listings in 1998 and 2005 (figure 1, in the Doidge
report). Before Sarbox came in, London’s Main market was the leader, with 466
foreign listings; Nasdaq was second, with 441, and NYSE was third, with 392.
In 2005, post-Sarbox, the NYSE was in first place, with 452 foreign listings,
London’s Main Market had fallen to second place, with just 334, and Nasdaq was
third, with 332. Meanwhile, London’s AIM had come out of nowhere to sit in fifth
place (after Euronext), with 220 foreign listings. Says the report:
It is critical to understand that the typical firm that lists on AIM is a
small firm that would not have listed on a U.S. exchange, either in the 1990s
or in more recent years. Consequently, it is simply wrong to interpret the
success of AIM and the resulting growth in market share of London as evidence
of a decline in the attractiveness of U.S. exchanges.
The report looks at lots of different variables, including the increase in
market capitalization which comes with a foreign listing, and the likelihood
of any given company listing in the US. On every count, it finds no indication
of any lack of competitiveness on the part of New York exchanges.
I would very much like to see how someone like Hal Scott will respond to this
paper, and for the time being I’m reserving judgment. But it’s surely good to
see the debate enjoined, rather than being dominated by one side.
(By the way, I’m just talking about foreign listings, here. The superb stock
and bond issuance numbers
being registered for the past couple of quarters are dominated by domestic companies,
who would never list abroad and therefore don’t really help us to understand
whether New York is losing competitiveness.)