Abstract
We propose that the persistence in ADR mispricing is due to information asymmetry associated with the underlying stocks. We employ three alternative proxies for the information asymmetry including the investment freedom score of the underlying stock country, the listing level of the ADR, and the idiosyncratic risks of the underlying stock. We find that mispricing is higher for underlying stocks from countries with low investment freedom, for level I ADRs, and for underlying stocks with higher idiosyncratic risk. Information asymmetry is priced accordingly in ADR valuations.
Talk to us
Join us for a 30 min session where you can share your feedback and ask us any queries you have
Schedule a callDisclaimer: All third-party content on this website/platform is and will remain the property of their respective owners and is provided on "as is" basis without any warranties, express or implied. Use of third-party content does not indicate any affiliation, sponsorship with or endorsement by them. Any references to third-party content is to identify the corresponding services and shall be considered fair use under The CopyrightLaw.
