Market liquidity and strong economic growth are key drivers of initial public offering (IPO) activity, but relaxing listing rules can help too, according to new research from the World Federation of Exchanges (WFE).
On Wednesday, the global industry trade group issued a paper that examines the factors associated with activity in global IPO markets. The research looked at activity on 79 global stock exchanges between 2002 and 2024.
Among other things, the analysis found that exchanges with robust market liquidity and economies with stronger GDP growth generate “significantly more” IPO activity — although the relative importance of these factors varies.
“Advanced economies are more sensitive to volatility and macroeconomic conditions, emerging markets benefit most from liquidity enhancement, financial development, and economic growth,” the WFE noted.
At the same time, the research found that regulatory requirements, such as listing standards, also play a role.
Overall, markets with tougher listing rules were linked to larger IPOs, but not necessarily to more deals.
“This suggests that the adoption of stricter requirements acts as a signal of firm quality and investor protection or simply reflects that only larger firms can meet these higher standards,” the group said.
It found that when exchanges relaxed their listing rules, the volume and value of deals increased significantly.
“Easing overly restrictive listing rules can increase both participation and capital raised, but reforms must maintain transparency and governance standards to preserve investor trust,” the group said.
Given the importance of liquidity, the WFE said that policymakers and exchanges “should prioritize improving secondary market infrastructure, transparency, and investor participation.”
For emerging markets, the group said IPOs “benefit most from liquidity enhancement and institutional reforms, while advanced markets should focus on mitigating volatility and sustaining investor confidence.”
“Liquidity is the lifeblood of vibrant public markets,” said Nandini Sukumar, CEO of the WFE, in a release.
“Exchanges and policymakers that invest in transparency, trading infrastructure, and investor confidence are best positioned to attract new listings and support real economic growth. The research also demonstrates that policy levers and regulatory action can be significant drivers of IPOs.”