Stock Deposit Certificates, a Modern Instrument for Financing, Maintaining Management Control and increasing liquidity in Capital Market

Subject Areas : Financial engineering

Mehdi Zolfaghari ¹ , reza Kiani ²

1 - Department of Management & Economic, Tarbiat Modares University
2 - Tehran Stock Exchang

Received: 2016-09-26 Accepted : 2017-01-16 Published : 2017-06-22

Keywords: financing, Liquidity, capital markets, base stock, stock deposit certificates,

Abstract :

Looking for financial markets development in developed countries and emerging markets, the different financial instruments have been introuduced to meet the wide and variety demand of investors. These instruments include a wide range of stocks, fixed income securities, derivatives contracts and a combination of them. In this regard, the stock deposit certificates as a financial engineering product, not only pleys as a financing Instrument in the capital markets, but according to the having the unique features, but increases the stock market efficiency by increasing stock liquidity. It also maintains the management control of major shareholders. Therefore regarding to the low liquidity of Iran stock market and lack of the companies willingness for financing through the issue of new shares (despite the serious need) due to loss of managerial control, in this paper we introduced the operating model of the stock deposit certificates that it was localized for Iran stock market. This instrument is considered as a new instrument in corporate financing (without loss of management control) and increase the efficiency of capital markets (through increased liquidity).