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Emerging market equities: Secondary listing lift for EM companies

A new study confirms the substantial benefits of a depositary receipt programme.

Michael Cole-Fontayn, The Bank of New York Mellon

"Companies don’t need the US for capital but they may want to have their depositary receipts traded there for other reasons"
Michael Cole-Fontayn, The Bank of New York Mellon

Although many companies from developed countries are currently reassessing the value of their secondary listings, the case for companies from emerging markets making use of such listings is pretty clear, according to a recent study by economic consultancy Oxford Metrica and the Bank of New York Mellon. The study, which looked at the American depositary receipt and global depositary receipt programmes of 628 firms since 1980, found that on average such programmes were responsible for adding more than 20% to shareholder value in their first year, as the international markets welcome the greater financial disclosure, transparency and discipline required by such listings.

Regional variations

The percentage of additional value created by depositary receipt programmes, however, varies significantly according to a company’s region of origin.

An international listing adds just 8% to the value of companies from Europe, the Middle East and Africa, but 15% for Asian companies and 35% for Latin American and Bric (Brazil, Russia, India and China) companies.

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