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1 – 10 of over 1000Mark Schaub and Bruce L. McManis
We utilize cross-sectional regression analysis to identify key variables affecting the initial three-year holding period returns of foreign equities traded as American Depository…
Abstract
We utilize cross-sectional regression analysis to identify key variables affecting the initial three-year holding period returns of foreign equities traded as American Depository Receipts (ADRs) on the New York Stock Exchange (NYSE). Our results suggest that U.S. market index movements and foreign exchange rates are the main determinants of the initial three-year holding period returns for 285 ADRs listed from January 1990 through December 2002. The determinants vary once the sample is broken into subsets comparing ADRs issued before 1998 to those issued afterwards, ADRs issued as IPOs versus SEOs, and Asia Pacific ADRs versus European and Latin American ADRs. We also find that U.S. interest rate movements and type of ADR issue (IPO versus SEO) provide little explanatory power for ADR returns overall.
DeQing Diane Li and Kenneth Yung
Though stock portfolio return autocorrelation is well documented in the literature, its cause is still not clearly understood. Presently, evidence of private information induced…
Abstract
Purpose
Though stock portfolio return autocorrelation is well documented in the literature, its cause is still not clearly understood. Presently, evidence of private information induced stock return autocorrelation is still very limited. The difficulty in obtaining foreign country information by small investors makes the private information of institutional investors in the ADR (American Depository Receipt) market more significant and influential. As such, the ADR market provides a favorable environment for testing the effect of private information on return autocorrelation. The purpose of this paper is to address this issue.
Design/methodology/approach
In this paper, ADRs are sorted annually into three groups based on market equity capitalization. Within each capitalization group, ADRs are further sorted into three groups based on the fraction of shares held by institutional investors. Each ADR is assigned to one of the nine groups and group membership is rebalanced each year. The return autocorrelation of individual ADR securities and ADR portfolios for each group are then calculated.
Findings
The results demonstrate that ADR individual stock and portfolio daily return autocorrelations are positively related to institutional ownership. It is also found that other explanations, such as non‐synchronous trading, bid‐ask spread and volatility of ADR, cannot explain the positive relation between daily return autocorrelations and institutional ownership of ADR.
Originality/value
Since ADR market is more suitable than other markets for testing the role of private information, stronger and clearer results are got accordingly. This paper suggests that trading strategy based on private information of institutional investors can lead to stock return autocorrelation in ADR daily returns.
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This study examines the initial two‐week excess performance relative to the S&P 500 Index of American Depository Receipts (ADRs) listed on the New York Stock Exchange from January…
Abstract
Purpose
This study examines the initial two‐week excess performance relative to the S&P 500 Index of American Depository Receipts (ADRs) listed on the New York Stock Exchange from January 1987 to September 2001 to determine whether short‐term wealth effects exist.
Design/methodology/approach
Standard intial public offering methodology is used to test for significant excess performance.
Findings
Results for the entire sample of 281 ADRs suggest the initial excess performance was not significant. However, after segmenting the sample, emerging market ADRs significantly outperformed the S&P 500 by over three per cent while developed market ADRs underperformed by 0.92 per cent. Also, Latin American ADRs outperformed the market index by nearly five per cent during the first two weeks after issue while European ADRs underperformed the market by nearly one per cent. Asia Pacific ADRs underperformed the S&P 500, but not significantly in the early trading.
Research limitations/implications
The findings suggest emerging market ADRs, particularly those from the Latin American region, perform well in the early trading while developed market ADRs do not. Future research may identify variables that affect or explain ADR excess returns.
Originality/value
The paper provides insights into the types of ADRs that accumulate wealth in the short term investment horizon.
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The purpose of this paper is to determine what types of short-term wealth effects accrued to European and Latin American American Depository Receipt (ADR) investors and whether…
Abstract
Purpose
The purpose of this paper is to determine what types of short-term wealth effects accrued to European and Latin American American Depository Receipt (ADR) investors and whether these were affected by the type of issue (initial public offerings (IPO) vs seasoned equity offerings (SEO)) or the date of issue (1990s vs 2000s).
Design/methodology/approach
Standard ADR and IPO excess return methodology is utilized to compute and test excess returns against a US investment benchmark. This methodology is used in many ADR and IPO studies.
Findings
European SEOs listed in the 2000s did better than those listed in the 1990s. The results for European IPOs were the opposite. Latin American SEOs did better relative to the US market index for issues listed in the 1990s as compared to those listed in the 2000s. Once again the results for Latin American IPOs were the opposite.
Originality/value
This study differs from previous studies by emphasizing differences in short-term return behaviour for Latin American and European ADRs listed during a decade of US market stability (the 1990s) vs those listed in the 2000s when the US stock market encountered times of extreme return volatility. These timing differences affect not only the returns of all the ADRs but also show how ADR IPOs and SEOs tend to have opposite return behaviour based on timing. These return differences are important because the major benefits of portfolio diversification are achieved when asset returns are less correlated with each other.
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Simon Gibbon and Najat Khalifa
Adverse drug reactions (ADRs) are increasingly recognised as an important cause of morbidity and mortality. Psychiatric patients, and especially those in forensic units, may be at…
Abstract
Adverse drug reactions (ADRs) are increasingly recognised as an important cause of morbidity and mortality. Psychiatric patients, and especially those in forensic units, may be at increased risk of ADRs. Detection and documentation of previous ADRs are essential in reducing the risk of future ADRs. A baseline audit was undertaken, and subsequently the recording of ADRs on the drug cards of patients in a forensic psychiatry unit was re‐audited. Poor levels of documentation of ADRs were found. Following the baseline audit, a number of simple measures were undertaken which improved performance at re‐audit.
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The purpose of this study is to determine whether Latin American ADRs provided US investors with international diversification benefits as determined by comparing excess returns…
Abstract
Purpose
The purpose of this study is to determine whether Latin American ADRs provided US investors with international diversification benefits as determined by comparing excess returns from issues listed in the 1990s to those listed in the 2000s. A further sample breakdown compares IPO returns to SEO returns.
Design/methodology/approach
Standard ADR return methodology used in many previous studies is utilized to compute and test excess returns. This methodology is the same as the standard methodology used in IPO studies.
Findings
The total Latin American ADR sample returned roughly the same as the S & P 500 index for the three year holding period; however, those issued before 2000 underperformed the index by nearly 19 percent while those listed after January 1, 2000 outperformed the index by nearly 58 percent. The excess returns of IPOs were nearly 50 percent less than SEOs when compared to the index. Also, both IPOs and SEOs listed after the new millennium began drastically outperformed those listed in the 1990s (when compared to the S & P 500 index).
Originality/value
This study differs from previous studies by emphasizing differences in return behaviour for Latin American ADRs listed during a decade of steady sustained growth (the 1990s) versus those listed in the 2000s when the US stock market encountered times of extreme return volatility. The implications of the return differences help determine whether these ADRs provided investors with true diversification benefits. Also, the dataset includes fresh results for ADRs listed during and trading through the mortgage crisis of 2008.
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Narjess Boubakri, Olfa Hamza and Maher Kooli
Purpose – Study the firm-level and country-level determinants of US institutional investors' holdings in American Depositary Receipts (ADRs) from emerging…
Abstract
Purpose – Study the firm-level and country-level determinants of US institutional investors' holdings in American Depositary Receipts (ADRs) from emerging markets.
Methodology/approach – We use a sample of 112 firms from emerging markets that listed as ADRs between 1990 and 2005. Rather than adopting the issuer's perspective, we take in this study the point of view of the investor and we focus on the US institutional investors' participation in ADR firms.
Findings – We find that institutional investors hold higher stakes in foreign firms that are listed on more restrictive exchanges, in large, privatized, more liquid, and more transparent firms. Mutual investors and other institutional investors also prefer firms from countries with weaker institutional environments and from civil law legal tradition. Controlling for country-level determinants increases significantly the explanatory power of the model.
Social implications – Our results have important implications for firms from emerging markets seeking to attract foreign institutional investors.
Originality/value of the chapter – We focus on the motivations of investors when they choose to invest in the ADR, rather than on the ADR issuer motivation. In addition, we consider all types of institutional investors that acquire a participation in an ADR firm.
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Mark Schaub and Garland Simmons
American depository receipts (ADRs) listed on the New York Stock Exchange during the 1990s and 2000s are compared to determine how well they performed versus the US index and…
Abstract
American depository receipts (ADRs) listed on the New York Stock Exchange during the 1990s and 2000s are compared to determine how well they performed versus the US index and respective regional indexes utilizing three-year holding period excess returns. Results suggest that ADRs listed in the 2000s perform better than those in the 1990s. Also, seasoned equity offerings performed better than initial public offerings. Regression analysis indicated the best predictors of ADR performance are the returns of the respective regional index where the ADR-listing firm is headquartered, the date of issue (2000s vs 1990s), and whether the ADR was from an emerging economy.
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Danjue Clancey-Shang and Chengbo Fu
The authors investigate how market quality diverges between foreign firms and domestic firms on the US stock market in response to the Russia–Ukraine conflict.
Abstract
Purpose
The authors investigate how market quality diverges between foreign firms and domestic firms on the US stock market in response to the Russia–Ukraine conflict.
Design/methodology/approach
With an event study approach, the authors compare foreign firms with domestic firms in their market responses over the three-day window around the outbreak of the war. Further, with Difference-in-Difference (DID) analyses, the authors study the change in foreign firms' market quality upon this outbreak in comparison with their domestic counterparts. Finally, the authors compare the foreign firms across firm specific characteristics and home country characteristics.
Findings
The authors find that foreign stocks listed in the US experience more severe market quality deterioration compared to the stocks' domestic counterparts. This effect is especially strong for companies from countries considered friendlier towards Russia and companies that are not cross-listed. The authors' findings are consistent with the information asymmetry hypothesis concerning market quality. Moreover, US market investors have more concerns over political risks with non-US-aligned political standings during war times.
Research limitations/implications
The authors' findings are consistent with the information asymmetry hypothesis concerning market quality. Moreover, US market investors have more concerns over political risks over non-US-aligned political standings during war time.
Practical implications
Since both countries in the conflict are in Europe, the US stock market, to a certain degree, becomes a safe haven for capital from Europe and other countries. In the meantime, American Depository Receipts (ADRs) have been important for US investors to create a globally diversified portfolio, and the knowledge regarding ADRs' vulnerability to international geopolitical events is valuable. The author' results are informative for stock market investors to understand the market dynamics for international and domestic companies during this extremely uncertain time.
Originality/value
This is the first study that examines the market quality divergence between foreign firms and domestic firms on the US stock market in response to the Russia–Ukraine conflict. The authors provide novel evidence on the change in ADRs' market quality associated with significant political uncertainty. The authors show that ADRs' market quality is more vulnerable to international geopolitical risks relative to otherwise comparable domestic firms.
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This study tests the signaling and tunneling models of dividend policies by examining the relationship between the ownership structure and the dividend payout in a setting where…
Abstract
Purpose
This study tests the signaling and tunneling models of dividend policies by examining the relationship between the ownership structure and the dividend payout in a setting where strong institutional governance and weak firm-level governance coexist.
Design/methodology/approach
Chinese American Depository Receipts (ADRs) listed in the US offer an excellent opportunity to study dividend policy where strong institutional governance and weak firm-level governance coexist. Using a sample of 161 Chinese ADRs from 2004 to 2018, this study examines the relationship between the firm's ownership structure and cash dividend policy.
Findings
This study shows that high levels of controlling shareholder ownership and high levels of state ownership are associated with high dividend payouts. A high level of controlling shareholder ownership has a negative effect on its firm value. Dividend payments in those firms mitigate the negative effect, consistent with the signaling (substitution) model. A high level of state ownership is beneficial to its firm value. However, high dividend payment in those firms decreases the benefit, supporting the tunneling model.
Practical implications
This study covers 161 Chinese ADRs listed in the US with a total market capitalization of over $2 trillion and reveals that dividend tunneling could occur in Chinese government controlled ADRs. Findings in this study would offer valuable insights for US investors and regulators.
Originality/value
This paper extends the tunneling hypothesis to the topic of dividend policy in a setting where strong institutional governance and weak firm-level governance coexist. This study shows that tunneling through dividends can happen among Chinese government controlled ADRs in the US. It also complements the literature by extending the examination of the dividend tunneling model from a relatively small universe of master limited partnership (Atanssov and Mandell, 2018) to a larger universe of Chinese ADRs listed in the US with a total market capitalization over $2 trillion US dollars.
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