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 percent 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. Venture capital, private equity, and private credit have grown exponentially in recent years. These markets offer the flexibility of patient capital without the regulatory burdens imposed by public markets. As a result, many companies now remain private longer – or indefinitely – reducing the role of IPOs as the typical way to raise capital. Institutional investors have also embraced private markets as a core component of their portfolios, reinforcing this trend.

This transformation has created a new type of competition. Exchanges and regulators now compete across borders 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 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. For example, measures that enhance investor confidence can lower the cost of capital and broaden the investor base, indirectly benefiting issuers. Conversely, issuer-oriented reforms that simplify listing requirements, encourage entrepreneurship, or support innovation can often create new investment opportunities and improve long-term returns for investors.

In my new article, I explore how those reforms can be implemented. Using Singapore as a case study, my article examines how countries can enhance the international competitiveness of their public equity markets while navigating the risks and opportunities arising from the growth of private markets.

Singapore faces certain structural constraints, largely due to the small size of its economy, which partly explains what I refer to as the “Singapore Capital Market Puzzle” (SCMP), the persistent challenge of developing Singapore’s equity capital markets. Indeed, despite its stature as a premier financial hub with trillions of dollars’ worth of assets under management, Singapore’s public equity market remains subdued. The number of listed companies has declined steadily over the past decade, IPO activity lags regional peers, and liquidity is far below larger markets. This paradox is not unique to Singapore, though. For instance, other small but globally connected economies with vibrant financial ecosystems, such as Luxembourg, also have a modest domestic equity market. Therefore, the size of the real economy is a factor that partially explains the SCMP and certainly limits Singapore’s ability to develop a vibrant equity capital market.

Despite those constraints, there remains 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 to attract listings and make Singapore’s capital markets more appealing to investors. In my article, I argue that while those efforts are a step in the right direction, additional reforms are necessary to enhance the attractiveness of Singapore’s equity markets.

Two key issues 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, and particularly the protection of minority shareholders. 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’s corporate governance practices are among the world’s best, consistently ranking at the top of the minority shareholder protection indicator in the now-defunct Doing Business Index. However, as in many other jurisdictions around the world, these practices were largely imported from systems dominated by companies with dispersed ownership structures, such as those in 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 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, largely inspired by the UK Takeover Code, also warrants reconsideration. For instance, under the non-frustration rule, a cornerstone of the regulatory framework for takeovers in Singapore, the board of directors must not take any action that could frustrate a bona fide takeover bid without shareholder approval. This rule aims to protect minority shareholders and ensure that managers do not entrench themselves at the expense of shareholders. However, in companies dominated by controlling shareholders, which are common in Singapore, the practical effect of the rule is significantly diluted. Since controlling shareholders hold the majority of voting rights, they can easily approve actions that frustrate a takeover.

To address this structural disparity, the non-frustration rule should be revisited. Instead of requiring shareholder approval, my paper suggests that any board action intended to frustrate a takeover should be approved by a majority of the minority (MOM). Moreover, if such MOM approval is required, Singapore could even consider adopting some anti-takeover mechanisms that are not currently allowed, such as poison pills and staggered boards, if these measures were also authorized by minority shareholders. This approach balances managerial autonomy and minority shareholder rights, recognizing that in certain circumstances, minority shareholders may prefer defensive measures to protect the company from certain bidders.

Another key aspect of the regulatory framework for takeovers in Singapore is the mandatory takeover bid rule, which obliges any bidder acquiring a threshold of at least 30 percent of the target company’s voting rights to extend an offer to purchase all remaining shares at an equitable price. This mechanism is intended to ensure that minority shareholders are afforded a fair exit opportunity and that the control premium is distributed equitably among all investors. While conceptually appealing, the mandatory bid rule substantially elevates the cost of acquiring control (Enriques, 2004), thereby deterring hostile takeovers and potentially dampening the market for corporate control.

A voluntary takeover system, as practiced in the United States, where acquirers are not obligated to make offers to all shareholders, can often be more appropriate. In Singapore, where corporate ownership is predominantly concentrated in the hands of controlling shareholders, a voluntary regime may not significantly affect management incentives, as the threat of replacing management without the controller’s consent is generally not credible. However, a voluntary regime may reduce the costs of acquiring a company, thereby facilitating changes of control that can benefit shareholders and contribute to capital market development by allowing new controllers to implement a superior business plan.

Accordingly, the mandatory takeover-bid rule also needs to be reconsidered. A more flexible framework may be to maintain the rule as a default mechanism but allow for exceptions if minority shareholders – through a MOM approval – consent to opt out. This approach would preserve minority protections in markets where minority shareholders often consist of retail or relatively passive institutional investors (as happens in Singapore) while enabling more efficient changes of control if those whom the rule is supposed to protect opt out. In jurisdictions with more active and sophisticated investors, however, an opt-in structure for mandatory takeover bids could be justified.

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 against tunneling and other opportunistic behaviors by corporate insiders, granting founders greater discretion could make public listings more attractive without undermining investor confidence.

Tax policy also influences corporate financing decisions. In most systems, and Singapore is no exception, debt enjoys preferential treatment through interest deductibility, while equity receives no equivalent benefit. This bias encourages leverage and discourages equity financing. In Belgium, the adoption of an allowance of corporate equity regime, which provides a notional deduction on the incremental equity of firms, has been associated with an increase in equity capitalization and a reduction in debt ratios (Panier et al, 2015). In turn, this tax reform can help promote more developed equity capital markets (OECD, 2024) while potentially achieving other socially desirable goals such as a more stable financial system (Gurrea-Martínez and Remolina, 2019).

Other measures to revitalize Singapore’s equity markets include increasing retail investor participation through: (i) pension reforms encouraging greater domestic equity allocations; and (ii) expanding the definition of accredited investors to include those with knowledge but not the requisite high-level of assets or income.

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. While such efforts certainly benefit some stakeholders – such as lawyers, bankers, and stock exchanges – similar economic and employment opportunities can be generated through other segments of the financial sector. In fact, Luxembourg and Singapore illustrate this point well: Both countries rank among the world’s wealthiest nations, in part due to the vibrancy of their financial industries. Yet, both jurisdictions have small domestic equity markets.

In the global debate on the decline of IPOs and the rise of private markets, it is important to keep in mind that the strength of a financial system should be assessed by its ability to channel capital into productive investment, support innovation, and foster growth rather than by how these outces are achieved – through markets, bank lending, or some other method (Levine, 2002). A diverse financial system comprising a competitive banking sector, developed public markets, and private markets will be best positioned to serve the real economy. Yet, countries should not be obsessed with the number of IPOs or the size of their equity capital markets. Instead, the priority for regulators and policymakers should be to ensure that the financial sector continues to support the real economy while effectively protecting investors and maintaining the stability of the financial system in a new era of capital markets and corporate financing marked by increasingly blurred boundaries between public and private markets.

This post comes to us from Aurelio Gurrea-Martínez, an associate professor at Singapore Management University. It is based on his recent article, “Strengthening the International Competitiveness of Capital Markets: Global Insights and Local Strategies,” available here.