Strengthening the International Competitiveness of Capital Markets: Global Insights and Local Strategies

Global capital markets are undergoing profound transformation. Over the past decade, there has been a marked decline in Initial Public Offerings (IPOs) in most advanced economies, including those with highly developed capital markets such as the United Kingdom and the United States. Interestingly, during the same period, countries like Indonesia, Malaysia, Thailand, and particularly China have witnessed a significant increase in the number of listed companies, contributing to making Asia home to approximately 55% of all listed companies worldwide (OECD, 2025).

Much of the decline in IPO activity in many advanced economies can be attributed to the expansion of private markets. In the current environment, regulators and stock exchanges compete (and struggle) to attract listings, while domestic public markets compete with private markets. In this new era of capital markets and corporate financing, policymakers face several challenges. First, they need to make sure that public markets remain attractive. Second, they need to ensure that corporate and financial laws can effectively respond to a growing private market in which investors (including retail investors) are expected to increasingly participate.

Policy discussions on improving the regulation of capital markets often frame the interests of issuers and investors as conflicting. Nonetheless, reforms do not always lead to such trade-offs. Many regulatory interventions can advance the interests of both. In my new article, entitled “Strengthening the International Competitiveness of Capital Markets: Global Insights and Local Strategies”, I explore how those reforms can be implemented and how countries can navigate some of the risks and opportunities arising from the growth of private markets.

Singapore faces structural constraints due to the small size of its economy, contributing to what I term the “Singapore Capital Market Puzzle” (SCMP): despite being a premier financial hub, Singapore’s public equity market remains subdued, with declining listings, lagging IPO activity, and limited liquidity. Similar dynamics exist in other small, globally connected financial centers, such as Luxembourg.

Despite those constraints, there is significant potential for the development of Singapore’s equity capital markets. To that end, the Monetary Authority of Singapore and the Singapore Exchange are adopting different strategies. In my article, I argue that, while these efforts are a step in the right direction, additional reforms are necessary to further strengthen the international competitiveness of Singapore’s equity markets.

Two key issues that must be addressed are the low liquidity and the relatively low valuations in Singapore’s equity markets. To address these challenges, the law and finance literature has consistently emphasized the importance of investor protection. For instance, some studies have shown that certain reforms can enhance market liquidity and drive higher valuations by adopting class actions (Restrepo, 2023), providing more disclosure and facilitating private enforcement through liability rules (La Porta et al, 2006), and strengthening the protection of minority shareholders (La Porta et al, 2002; Gompers et al, 2003).

By international standards, Singapore remains one of the jurisdictions with the world’s best corporate governance practices. In fact, it used to be ranked at the top of the minority shareholder protection indicator in the World Bank’s abolished Doing Business Index. However, as in many other jurisdictions around the world, the “best” corporate governance practices adopted in Singapore were largely imported from systems dominated by companies with dispersed ownership structures, such as the United States and the United Kingdom. In Singapore – as in much of Asia, Latin America, Continental Europe and beyond – controlling shareholders, typically families or the state, dominate listed firms. In such settings, the central conflict is not between managers and shareholders but between controlling shareholders and minority investors. Therefore, reforms aiming to foster investor confidence and ultimately enhance market valuation, liquidity and the attractiveness of capital market must prioritize the protection of minority shareholders. My paper suggests several reforms in that direction, including: (i) the empowerment of minority shareholders for the appointment and removal of both independent directors (Bebchuk and Hamdani, 2017) and auditors (Gelter and Gurrea-Martínez, 2020); (ii) the revitalization of the statutory derivative action, rarely used in Singapore; and (iii) the implementation and facilitation of class actions.

The takeover regime also warrants reconsideration. The non-frustration rule, which prevents boards from frustrating bona fide takeover bids without shareholder approval, is weakened in practice where controlling shareholders dominate. Reforms could require approval by a majority of the minority (MOM) instead. Similarly, the mandatory takeover bid rule, while ensuring minority exit rights, raises acquisition costs and deters changes of control. A flexible approach—maintaining the rule by default but allowing opt-outs via MOM approval—could preserve minority protection while enabling more efficient corporate control transitions (Enriques, 2004).

Singapore’s framework for dual-class shares (DCS) also needs to be revisited, especially if the proposed rules for the protection of minority shareholder are adopted. Currently, DCS are prohibited on the Catalist (listing venue primarily targeting growth firms) and subject to several restrictions on the Mainboard. Critics argue that DCS entrench control and weaken accountability (Bebchuk and Kastiel, 2017). Nonetheless, DCS can enable founders to pursue their “idiosyncratic vision” (Goshen and Hamdani, 2016) and encourage innovative firms to go public. Therefore, a more sensible approach for Singapore may involve allowing DCS structures on the Catalist board (Lin, 2018; Gurrea-Martínez, 2021), the natural home of growing companies with potentially disruptive founders and business models. Similarly, some of the current restrictions on the Mainboard should be relaxed. With the proposed rules strengthening the protection of minority shareholders, granting founders greater discretion could make public listings more attractive without undermining investor confidence.

Tax policy also shapes corporate financing decisions. In most jurisdictions, including Singapore, debt is tax-favored through interest deductibility, encouraging leverage over equity. By contrast, Belgium’s allowance for corporate equity—which grants a notional deduction for incremental equity—has been linked to higher equity capitalization and lower debt ratios (Panier et al, 2015), helping to promote more developed equity markets (OECD, 2024) and greater financial stability (Gurrea-Martínez and Remolina, 2019).

Finally, advances in technology, particularly blockchain, offer opportunities to embed governance and disclosure into market infrastructure, enabling real-time transparency and compliance (Brummer, 2015; Fox et al, 2021). Additionally, the personal insolvency regime in Singapore, along with certain rules penalizing bona fide insolvent debtors, should be revisited to destigmatize failure and ultimately foster entrepreneurial activity and the development of the venture capital industry (Armour and Cumming, 2008). That, in turn, may lead to more local companies being eligible to go public, given the mutually reinforcing relationship between a vibrant venture capital system and well-developed capital markets (Gilson and Black, 1998).

The article concludes by examining how countries should adapt their regulatory frameworks to a new era of corporate financing characterized by the rise of private markets. It also provides a critical analysis of the “capital market obsession” that seems to be driving many debates over the decline of IPOs and the need to embark on different strategies to revitalize equity capital markets.

(*) A version of this post was previously published on the Columbia Law School’s Blue Sky Blog on Corporations and Capital markets. The full version of the article can be found here.

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Aurelio Gurrea-Martinez is a Professor of Law at the Yong Pung How School of Law, Singapore Management University, and an ECGI Research Member.

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