Affordable Access

Publisher Website

Global and local information asymmetries, illiquidity and SEC Rule 144A/Regulation S: The case of Indian GDRs

Authors
Journal
Journal of Banking & Finance
0378-4266
Publisher
Elsevier
Publication Date
Volume
26
Issue
8
Identifiers
DOI: 10.1016/s0378-4266(01)00177-7
Keywords
  • Global Depositary Receipts
  • Liquidity
  • Information
  • Asymmetries
  • Sec Rule 144A And Regulation S

Abstract

Abstract Between 1992 and 1997, Indian firms were the most frequent issuers of equity-backed Global Depositary Receipts (GDRs) governed by the SEC's Rule 144A and Regulation S. They also accounted for the highest dollar volume. Home-market stock price responses to these issues are consistent with the hypotheses that GDRs enable firms to resolve two forms of information asymmetry: (1) an asymmetry between issuing firms and international investors that results from market segmentation and (2) an asymmetry between Indian firms and home-market investors that resembles asymmetries that help explain abnormal returns in equity private placements by US firms. Our evidence suggests that GDR issuance can increase investors' recognition of underlying shares even if there are no liquidity enhancements and even if disclosure requirements are not as demanding as those imposed on foreign firms whose depositary receipts trade in public US markets.

There are no comments yet on this publication. Be the first to share your thoughts.