How International Listings by the Indian Firms Affect Their Access to the External Capital Markets and Investment-Cash Flows Sensitivity?
37 Pages Posted: 14 Dec 2006
Abstract
Between May 1992 and June 2001, seventy-two Indian firms listed their 85 Depositary Receipt (DR) programs on the foreign capital markets. Existing literature on foreign listings offers 'improved access to capital markets' as one of the main considerations for firms' foreign listing decisions. Managerial survey-based studies of the non-U.S. firms listed on the U.S. exchanges identified 'improved access to external capital markets' as one of the main motives for listing on the foreign markets. Lins, Strickland and Zenner (LSZ, 2000) reiterated the findings of the survey-based studies by analyzing the firm level financial data of the emerging markets firms and the developed markets firms listed on the U.S. exchanges. Unlike the sample of LSZ (2000), most Indian DR programs are listed on the European exchanges rather than on the U.S. exchanges. So far there has not been any major study done specifically with the sample of foreign listed Indian firms to see whether a similar consideration influences the foreign listing decisions of the Indian firms. Therefore, the conclusions of the existing studies done with samples of non-U.S. firms listed on the U.S. markets at best can only be conjecture as to whether 'improved access to external capital markets' is an important consideration for Indian firms listing on the foreign markets. This paper employs a methodology similar to LSZ (2000) and studies firm level financial data of foreign listed Indian firms to see whether the 'improved access to external capital markets' is an important consideration for Indian firms listing on the foreign markets. We conclude that foreign listings of Indian firms do not enhance their access to the external capital markets.
Keywords: ADRs, GDRs, Depositary Recipts, Indian, Capital constraints, Underlying Shares, Foreign Listings, LSE, NYSE, Luxembourg Stock Exchange, Investment-Cash Flows Sensitivity
JEL Classification: G12, G14, G15
Suggested Citation: Suggested Citation
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