In a World Bank paper "International Financial Integration through Equity Markets: Which Firms from Which Countries Go Global?" Stijn Claessens and Sergio Schmukler compare the behavior of nearly 40,000 firms in 111 countries. The study, covering the 1990s, shows that contrary to popular opinion relatively few firms were tapping international markets – mainly bigger firms in bigger and more open economies:
At the country level, there is by now consensus that there is a strong relation between domestic stock market development and macroeconomic factors; [...] Poor domestic environments have long been considered one of the main reasons for capital flight and greater use by domestic residents and firms of all types of financial services offered internationally.
From a different perspective, better domestic environments can increase the attractiveness of firms to investors, especially foreign ones. Foreign investors who have the ability to invest globally will generally offer larger amounts of external financing and lower cost of capital as firms’ host country fundamentals improve. By listing abroad, a firm only adds to this tendency.
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