Global Depositary Receipts and Firm Performance: An Empirical Analysis of Pre-Post Issuance

Abstract

This study examines the impact of Global Depositary Receipts (GDR) issuance on the financial performance of cross-listed Pakistani stocks. The study utilizes a balanced panel dataset of four cross-listed companies of the Pakistan Stock Exchange: namely Muslim Commercial Bank, Oil and Gas Development Corporation, United Bank Limited, and Lucky Cement, for the period of 2009 to 2016. The paper employed an event study methodology to explore the pre and post GDR issuance impact on price returns, liquidity, and risk. The findings reveal a significant impact of GDR issuance on the returns, liquidity and risk of sampled Pakistani cross-listed stocks in long term. To the best of our knowledge, this is the first study to examine the effects of GDRs in the context of Pakistani cross listed firms. Moreover, the study offers valuable insights for Pakistani firms, encouraging them to explore investors beyond the traditional geographic and legal boundaries using GDRs, as it provides long-term benefits to both investors and existing shareholders. Lastly, the study has limitation concerning its time-frame, industries and methodology. Future researchers may explore this area by performing in-depth quantitative analyses using data from additional industries.