Threshold effects of financial development on foreign listing: the roles of venture capital in developed and emerging countries

This paper examines financing abroad from the perspective of international financial development. We find that foreign listing activities are significantly associated with financial development indices, such as stock trading, domestic credit, soundness of banks, venture capital availability and financing by local equity markets. The spillover effect is more pronounced in emerging countries. A threshold model with a macro dynamic panel of 37 countries from 2006 to 2020 suggests that foreign listings and financial development (stock trading and venture capital availability) follow an inverted U-shaped pattern, while foreign listings and domestic credit follow a diminishing pattern. The policy and managerial implications indicate that countries face varying demands for foreign listings at different stages of financial development. When making decisions on seeking foreign capital policymakers should follow closely the changes in domestic financial development and institutions.