International Financial Integration through Depositary Receipts (DRs)

  • Obiyathulla Ismath Bacha International Centre for Education in Islamic Finance (INCEIF), Malaysia
  • Mansor H. Ibrahim International Centre for Education in Islamic Finance (INCEIF), Malaysia
Keywords: Depositary Receipts (DRs), cross-listing, OIC countries, Islamic finance, cointegration


The issue of liquidity and underdevelopment of the Organisation of Islamic Cooperation (OIC) stock markets has caused problems to companies in those countries that seek higher equity capital. One way out of this problem is to employ international markets more intensively by seeking cheaper cost of capital through Depositary Receipts (DRs). Many studies on DRs focused on emerging and developed countries, leaving many OIC countries behind. Thus, this study investigates the financial implication by examining the integration of returns of local and foreign stock markets via American Depositary Receipts (ADRs) and Global Depositary Receipts (GDRs) of OIC countries. Techniques employed in this study are cointegration and the speed of adjustments to examine the existence of integration between the local and foreign stock markets. The study covers a sample of 146 firms from 17 OIC countries that are cross-listed as ADRs or GDRs from 1992 to 2011. The findings show mixed results when some markets provide evidence of integration while others show evidence of segmentation. The study on the integration between DR and home equity markets has practical implications for both the international as well as domestic investors especially on portfolio selection, asset pricing and risk management


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Author Biographies

Obiyathulla Ismath Bacha, International Centre for Education in Islamic Finance (INCEIF), Malaysia

International Centre for Education in Islamic Finance (INCEIF), Malaysia



Mansor H. Ibrahim, International Centre for Education in Islamic Finance (INCEIF), Malaysia

International Centre for Education in Islamic Finance (INCEIF), Malaysia


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How to Cite
Bacha, O. I., Ibrahim, N., & Ibrahim, M. H. (2020). International Financial Integration through Depositary Receipts (DRs). Journal of Accounting and Finance in Emerging Economies, 6(1), 301-322.