Study shows some improvement in U.S. capital market competitiveness

The Committee on Capital Markets Regulation (CCMR), an independent and nonpartisan research organization directed by Harvard Law School Professor Hal S. Scott, released data indicating that U.S. capital markets showed slightly improved competitiveness this past quarter, though most measures of competitiveness still fall short of historical averages.

“While foreign companies continue to prefer non-U.S. financial markets for raising capital outside their home markets, and regulatory reform is still needed,” said Scott, “this quarter’s data offers a promising sign that competitiveness can be restored to U.S. markets.”

The CCMR study found that of the global initial equity offerings conducted outside a company’s home market, 18.3 percent of the volume is raised in the U.S. equity markets. While this measure is at its highest level over the past five years, the U.S. share of this volume remains well below its historical average of 28.7 percent (1996-2006). Furthermore, the U.S. markets still fail to attract the largest global IPOs, as only 2 of the 20 largest offerings this year have been conducted in the U.S.

U.S. public equity markets also showed modest improvement as foreign companies that choose to raise equity capital in the U.S. through initial offerings scaled back their reliance on private markets. However, despite the small improvement, the study indicates a continued aversion to U.S. public equity markets for initial offerings.

According to the CCMR, measures suggested in its 2006 Interim Report must be taken to continue to restore U.S. competitiveness. The committee also recommends regulators implement the provisions of the Dodd-Frank Wall Street Reform and Consumer Protection Act to minimize, to the extent possible, adverse competitive impacts, particularly in areas where the U.S. regulatory approach differs significantly from that taken in other markets. For more information, read the CCMR press release.

Hal Scott is the Nomura Professor and Director of the Program on International Financial Systems at Harvard Law School. In addition to being director of the CCMR, he is also co-chair of the Council on Global Financial Regulation, an independent director of Lazard, Ltd., a member of the Bretton Woods Committee, a past president of the International Academy of Consumer and Commercial Law and a past governor of the American Stock Exchange (2002-2005). Scott’s most recent books include the law school textbook “International Finance: Transactions, Policy and Regulation” (19th ed. Foundation Press 2012), and “The Global Financial Crisis” (Foundation Press 2009).