Factors Influencing the Indian Firms' Foreign Listing Decisions: A Survey Based Approach

Abstract

The growing internationalization of capital markets suggests that an increasing number of firms perceive the benefits of listing their securities abroad directly or in form of Depositary Receipts (DRs). Many other firms, however, still limit listing their securities to their domestic stock exchanges. The existing research has investigated the factors that influence foreign listing decision of firms either by taking a sample of firms from developed economies or by a mixed sample of firms from developed and emerging economies. So far there has not been any major study done specifically to investigate the factors which influence the foreign listing decision of firms from emerging markets. Therefore, no clear conclusions have emerged for firms from emerging markets regarding the factors that influence their foreign listing decision. This study fills this gap by taking a sample of firms from an emerging market like India. A survey of managers of foreign-listed Indian firms was conducted to know the factors that have influenced their foreign listing decisions. The managers of surveyed firms seem to be well motivated for the foreign listings and face very few barriers in their endeavours to list on the foreign markets. Foreign listings are perceived to: achieve a fair valuation for firm, increase the absolute number and proportion of foreign shareholders, increase the credibility of firms' financial statements, increase the firms' prestige and visibility, ease firms' future access to foreign capital markets and facilitate the firms' task of performing mergers and acquisitions in the foreign markets. While ADR firms perceive 'the increased possibility of getting involved in legal proceedings' to be the only significant barrier to their decision to list on the foreign exchanges, GDR listing firms perceive the firm's absolute size' to be the only significant barrier to their decision to list on the foreign markets.