This paper examines changes in systematic risk following global equity issues by US firms. Models of market segmentation show that if international capital markets are not fully integrated and demand curves for securities are downward sloping, firms issue equity at higher prices by issuing in multiple markets compared to issuance on a single domestic market. This would imply a reduction in the firm’s cost of capital and an increase in firm value. Using a sample of global equity offers during 1986–1993, we find that US firms that issue equity abroad experience a decline in systematic risk subsequent to issuance. After controlling for size, volume, and leverage effects, we find that this decline in systematic risk is larger in magnitude for global compared to a control sample of domestic equity issues. The larger the proportion of the offer sold abroad and the larger the increase in trading volume, the bigger the decline in systematic risk. Using a two-factor global risk model we find that while firms issuing equity abroad experience a decline in the domestic component of systematic risk, the foreign component increases. Overall, however, the net effect is a decline in the cost of capital.

This article examines the impact of U.S. firms issuing equity in multiple markets. We compare the stock price reactions to announcements of global equity offers to a control group of issues offered exclusively in the domestic U.S. market. All else equal, the adverse price reaction that typically accompanies equity issuance is reduced by 0.8 percent when some shares are sold abroad. The overall evidence suggests global offers are effective in expanding demand and reducing the price pressure effects associated with share issuance. The beneits of global offers appear to be associated with an increase in the number of foreign shareholders.

We study secondary market trades of debt issues by foreign firms in the U.S. under SEC Rule 144A, a unique market where the counterparties are qualified institutional buyers (QIBs). We find that even though the secondary yield spreads of foreign 144A debt issues are larger than comparable public debt issues by foreign and domestic firms in the U.S., the incremental impact of common risks – namely, credit, illiquidity, governance, and familiarity risks – on spreads are lower for foreign 144A issues compared to various control samples. Our finding is consistent with the notion that institutional participants, namely QIBs, play a specialized role in mitigating risk exposures in the foreign 144A secondary market.