Foreign capital mobilization via depository receipts- experiences of Chinese corporations and lessons for Vietnam

Abstract

Depository Receipt (DR) is a common and effective fund rasing method for corporations in foreign stock markets. Captial value raised via DRs reached 20 billion USD globally and trading volume of DRs in foreign markets has experienced an increasing trend since 2012 and achieved a growth rate of 16.2% in 2018, compared to the year of 2017 (Citibanks, 2018). Besides, issuing DRs facilitates issuers to proceed additional listings in various foreign stock markets with benefits such as reducing cost of capital, improving stock liquidity in domestic markets. In Vietnam, the stock market has witnessed fast-growing steps, causing funding raising channels through the domestic stock market to be more competitive, and hence, issusing DRs could be a new and efficient alternative approach. In which, issuing experiences from international firms, especially Chinese firms with similar economic background and business cultures will be significantly essential and valuable for Vietnamese firms. This paper, by analysing DR issuance practices of Chinese firms, states that a complete legal framework supporting DR issuings and issuers’ active moves in preparing issuing and listing conditions in international markets play a decesive role towards the success of this fund raising channel.