SOURCING EQUITY INTERNATIONALLY WITH DEPOSITARY RECEIPT OFFERINGS: TWO EXCEPTIONS THAT PROVE THE RULE

G. Karolyi ()

Journal of Applied Corporate Finance, 1998, vol. 10, issue 4, 90-101

Abstract: Corporations around the world are now aggressively raising equity capital in the U.S. by crosslisting their shares on major U.S. stock exchanges in the form of depositary receipts (DRs). After describing the process by which companies create DR programs to crosslist their shares in the U.S., this article surveys the existing empirical evidence on the effects of such cross‐listings on the companies' cost of capital, global risk exposures, and liquidity. Among the most notable findings, the article reports that significant positive share price reactions, reductions in risk measures, and increases in liquidity are observed following crossborder listings, though mainly in the case of non‐U.S. companies listing for the first time in the U.S. To illustrate these capital‐market effects, the article recounts in some detail two recent cases of international capital‐raising facilitated by DR offerings: Deutsche Telekom and China's Huaneng Power International.

Date: 1998
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