افزایش سرمایه در بازارهای نوظهور با رسیدهای سپرده گذاری سراسری محدود

Despite serious governance concerns revealed in Rule 144A and/or Regulation S Global Depositary Receipt (GDR) circulars, institutional investors voluntarily purchase these illiquid securities. Like issuers of Level III American Depositary Receipts (ADRs), GDR issuers exhibit strong pre-offer performance, with higher average Tobin's q ratios, sales growth rates, sales levels, returns on equity, and dividend payout ratios than their home-market counterparts. However, GDRs are issued predominantly by firms in emerging markets, while ADRs are issued mostly by firms in developed markets. After controlling for country and industry effects, we find that ADR issuers are larger and that they employ more reputable underwriters than GDR issuers do, but no other significant differences emerge. Notwithstanding their similarities, GDRs have larger discounts than ADRs, suggesting that legal bonding provides benefits that reputational bonding cannot fully replicate. However, within the sample of GDRs, pre-offer performance attributes also influence pricing. Specifically, discounts vary inversely with issue size but directly with firm size, suggesting that economies of scale exist in the GDR issue process and that potential agency costs are higher in larger firms. GDR discounts also vary inversely with incremental returns on equity in all partitions of the data, indicating the importance of pre-offer profitability in establishing the reputation of the issuing firm and in increasing the GDR offer price.

Between 1990 and 2005, foreign firms raised more than $65 billion in US private equity with the SEC's Rule 144A and/or Regulation S Global Depositary Receipts (hereafter Rule 144A/Reg S GDRs). This amount represents 30% of the dollar volume of equity funds raised by foreign firms outside their own markets during that period.1 Firms from emerging markets have been dominant players in this market, with Indian, Korean, and Taiwanese firms accounting for more than 26% of the total number of issues and more than 52% of the total dollar volume of capital raised with Rule 144A/Reg S issues. Because GDRs do not require SEC registration, severe restrictions limit their resale. Consequently, they are popularly referred to as “restricted GDRs.” This paper focuses on these restricted private equity issues. Unlike the more popular American Depositary Receipts (ADRs), Rule 144A/Reg S GDRs do not provide legal bonding.2 However, we argue that reputational bonding plays a crucial role in the Rule 144A/Reg S market. Other papers make similar arguments. Pinegar and Ravichandran (2002) argue, for example, that Rule 144A/Reg S issues help Indian firms resolve local and global information asymmetries, and Siegel (2005) shows that foreign firms reputed for fair treatment of minority shareholders secure privileged long-term access to outside finance, even when legal bonding fails.3,4 We extend these papers in three ways. First, we describe the home-market legal environment of GDR issuers based on information contained in 84 offering circulars purchased from Global Securities Information, Inc. Though not exhaustive, this representative sample allows us to detail interesting features about GDR issues that (to our knowledge) are not found elsewhere in the literature. Because these features reveal serious governance concerns, we argue that GDR issuers must have strong home-market performance reputations that are augmented by the willingness of reputable underwriters to sponsor the issues to attract institutional buyers in the US and elsewhere to purchase their illiquid securities. Second, we test this hypothesis with data on 412 ADR/GDR issues made by firms from 38 countries. With these data, we compare the attributes of 219 GDR issuers to the attributes of 193 ADR issuers. In each case, we measure pre-offer performance incrementally, i.e., relative to the performance of firms in their respective markets. Finally, we examine the joint influence of the incremental home-market performance attributes of the issuing firms and of their underwriters’ reputations on ADR and GDR pricing. 5 Specifically, we measure how the reputations of the issuing firms and their underwriters relate to the discount attached to ADR and GDR issues. Our findings can be summarized as follows. Corporate governance features in the offering circulars give cause for concern. Though Rule 144A/Reg S contract disputes may be settled in US or UK courts, GDRs derive their value from the underlying shares whose disclosure and monitoring requirements are governed by weak home-market legal regimes. Therefore, the ability of US or UK courts to remedy potential wrongs is severely limited. Moreover, average ownership concentrations are high for Rule 144A/Reg S issuers and voting rights for GDR holders are restricted or non-existent. Board representation is possible for minority shareholders if their rights are violated, but enforcement of those rights may be weak. Even if minority representatives are installed, they may exert little influence on large boards. Within the confines of their home markets, GDR issuers exhibit strong pre-offer performance, with incremental performance attributes that are remarkably similar to the incremental attributes of firms that issue Level III ADRs. Both groups have significantly higher average Tobin's q ratios, sales growth rates, sales levels, and returns on equity than do their home-market counterparts. GDR issuers also have higher average dividend payout ratios.6 When we control for country and industry effects, ADR issuers are larger and they employ more reputable underwriters than GDR issuers do, but no other significant differences emerge. Despite these similarities, differences in pricing remain. Discounts are larger for GDRs than for ADRs, even after we control for pre-offer performance and underwriter reputation, for country and industry effects, and for the effects of signaling (Hertzel and Smith, 1993), overvaluation (Hertzel et al., 2002), and potential diversification and liquidity benefits. Thus, legal bonding provides some benefits that reputational bonding cannot fully replicate. Nevertheless, the effects of reputational bonding are evident in the pricing of GDRs. Within that sample, discounts vary inversely with issue size but directly with firm size, suggesting that economies of scale exist in the GDR issue process and that potential agency costs are higher in larger firms. GDR discounts also vary inversely with incremental returns on equity in all partitions of the data, indicating that the pre-offer profitability of private issuers is important in establishing the reputation of the issuing firm and in increasing the GDR offer price. The rest of the paper proceeds as follows. Section 2 describes our data sources and sample selection process. Section 3 describes the legal background of GDR issuers. Section 4 presents the pre-offer performance attributes, discounts and other offer characteristics. Section 5 analyses the data cross-sectionally, and Section 6 concludes.

Unlike Level III ADRs, restricted GDRs do not provide legal bonding. Moreover, corporate governance features in Rule 144A/Reg S offerings indicate cause for concern. Though contract disputes may be settled in US or UK courts, GDRs derive their value from the underlying shares whose disclosure and monitoring requirements are governed by weak home-market legal regimes. Therefore, the ability of US or UK courts to right potential wrongs is severely limited. Moreover, average ownership concentrations are high for Rule 144A/Reg S issuers and voting rights for GDR holders are restricted or non-existent. Board representation is possible for minority shareholders if their rights are violated, but enforcement of those rights may be weak. Even if minority representatives are installed, they may exert little influence on large boards. Notwithstanding such concerns, we argue that institutional buyers voluntarily purchase these illiquid securities, in part, because of the strong pre-offer performance reputations of the issuing firms. Pre-offer attributes of GDR issuers closely resemble pre-offer attributes of firms that issue Level III ADRs. Both groups have significantly higher average Tobin's q ratios, sales growth rates, sales levels, and returns on equity than do their home-market counterparts. GDR issuers also have higher average dividend payout ratios. When we control for country and industry effects, we find that ADR issuers are larger and that they employ more reputable underwriters than GDR issuers do, but no other significant differences emerge. Despite these pre-offer similarities between GDR and ADR issuers, GDRs have larger discounts than ADRs, suggesting that legal bonding adds value that reputational bonding cannot fully replicate. Nevertheless, within the GDR sample, discounts vary inversely with issue size but directly with firm size. These findings are consistent with the hypotheses that economies of scale exist in the ADR and GDR issue process and that potential agency costs are higher in larger firms. GDR discounts also vary inversely with incremental returns on equity in all partitions of the data, suggesting that pre-offer profitability of private issuers is a robust determinant of the reputation of the issuing firm that leads to increased GDR issue prices.