American Depositary Receipts Research Articles

Do ADR Firms Have Different Dividend Policies Than U.S. Firms? A Comparative Study

This paper examines and compares the dividend policies of American depository receipt (ADR) firms and U.S. firms and identifies the factors that determine these policies for both types of companies. We find that ADR firms have higher dividend yields than U.S. firms, while U.S. firms have higher stock repurchase ratios than ADR firms. Results from univariate comparisons and multivariate analysis show that the determining factors of dividend payout and stock repurchases differ between these two types of firms. This finding holds for the robustness check conducted in this study. This paper provides further evidence regarding dividend policies of ADR firms and sheds light on the differences in dividend policies between non-U.S. firm and U.S. firms.

The impact of Robinhood traders on the volatility of cross-listed securities

This study investigates the impact of Robinhood investors' participation on the volatility of American depository receipts (ADRs). Using data on Robinhood account holdings in 382 ADRs from 33 countries around the globe, we show that their activity amplifies the cross-listed securities volatility. While Robinhood investors' involvement has soared in recent years, seemingly supplying additional trading liquidity, this provision appears to be associated with a deterioration of ADR stability. The detrimental effect holds across the COVID-19 period and is not subsumed by home-country pandemic intensity measures. Since the law of one price suggests that increased ADR volatility will negatively impact the underlying stocks in their home markets, our results have important implications for various government and market policy makers as well as for home-country firms considering cross-listing their stocks.

PCAOB international inspection access and debt contracting: Evidence from American Depositary Receipt firms

We examine whether the Public Company Accounting Oversight Board’s (PCAOB’s) international inspection access affects the usage of accounting-based debt covenants in bank loan contracts of American Depositary Receipt (ADR) borrowers. We show that there is an increase in the use of financial covenants in debt contracts after the auditor of an ADR borrower becomes subject to PCAOB inspections. We also document that lenders increase the usage of financial covenants only in loans to ADR borrowers domiciled in countries with weak home country intuitions, and the increase is more pronounced for ADR borrowers from countries without a local auditor regulatory oversight body. These findings suggest that PCAOB regulatory oversight enhances the perceived credibility of accounting numbers for debt contracting and serves as a substitute for the weak monitoring of auditors for ADR borrowers domiciled in countries with weak country institutions.

The Influence of Cognitive Biases and Financial Factors on Forecast Accuracy of Analysts.

The objective of this study was to jointly analyze the importance of cognitive and financial factors in the accuracy of profit forecasting by analysts. Data from publicly traded Brazilian companies in 2019 were obtained. We used text analysis to assess the cognitive biases from the qualitative reports of analysts. Further, we analyzed the data using statistical regression learning methods and statistical classification learning methods, such as Multiple Linear Regression (MRL), k-dependence Bayesian (k-DB), and Random Forest (RF). The Bayesian inference and classification methods allow an expansion of the research line, especially in the area of machine learning, which can benefit from the examples of factors addressed in this research. The results indicated that, among cognitive biases, optimism had a negative relationship with forecasting accuracy while anchoring bias had a positive relationship. Commonality, to a lesser extent, also had a positive relationship with the analyst’s accuracy. Among financial factors, the most important aspects in the accuracy of analysts were volatility, indebtedness, and profitability. Age of the company, fair value, American Depositary Receipts (ADRs), performance, and loss were still important but on a smaller scale. The results of the RF models showed a greater explanatory power. This research sheds light on the cognitive as well as financial aspects that influence the analyst’s accuracy, jointly using text analysis and machine learning methods, capable of improving the explanatory power of predictive models, together with the use of training models followed by testing.

Tax heist using American Depositary Receipts

Tax heist using American Depositary Receipts

The Effect of U.S. Investor Sentiment on Cross-Listed Securities Returns: A High-Frequency Approach

This paper studies the impact of a high-frequency investor sentiment measure (New FEARS) on the returns of foreign securities listed in U.S. markets as American Depository Receipts (ADRs). We recreate a high-frequency investor sentiment measure by aggregating search volume indices (SVIs) for a set of negative economic search terms. We find that ADR aggregate market returns exhibit a negative reaction to increases in searches for negative economic terms such as “recession”, “crisis”, and “bankruptcy” by U.S. households. This is the first paper to measure the effects of high-frequency investor sentiment on cross-listed securities. Moreover, the results are consistent throughout our study regardless of the variation of sentiment and aggregate market return measure we use. We also explore ADR regional market indices and show that Latin American ADRs are more sensitive to this investor sentiment measure.

EXAMINING THE RELATIONSHIPS BETWEEN BITCOIN, GOLD AND FINANCIAL ASSETS

ABSTRACT Cryptocurrencies have obtained substantial interest from bankers, investors, media, social media, and regulators. Bitcoin is a cryptocurrency and has the largest market capitalization. This paper investigates the return and volatility spillovers from S&P 500 and ADRs to Bitcoin and gold. The results of this paper indicate that there are no significant price and volatility spillovers from Bitcoin and gold to S&P 500. Results also suggest no evidence of significant price and volatility spillovers from Bitcoin and gold to ADRs. This is in line with data compiled by VenEck (2021) that concludes that there is no patterns of movement between Bitcoin and other markets such as S&P 500, gold etc. Furthermore, we also see price spillovers from S&P 500 and ADRs to Bitcoin and volatility spillovers from S&P 500 and ADRs to gold. Keywords Bitcoin, Gold, American Depositary Receipts, Stocks

The impact of political uncertainty on institutional ownership

This paper provides original evidence from institutional investors that political uncertainty greatly affects investment behavior. Using institutional holdings of common stock, we find that institutions significantly reduce their holdings by 0.8–2.3% points during presidential election years. Such effect holds for gubernatorial elections with cross-state-border difference-in-difference analysis and for tests using a political uncertainty index. The effect is the opposite for American Depository Receipts (ADRs). In addition, we find that institutions benefit financially from the observed strategy, and such strategy is in line with predicted outcomes of presidential election polls.

Multiple-Market Trading and Overnight Price Discovery: Evidence From American Depository Receipts

This paper compares the overnight price discovery of American Depository Receipts (ADRs) and other common stocks traded in the U.S. stock market, and examines how trading activities of ADRs’ underlying shares in home markets affect the price discovery. We find that the efficiency of opening price and the price discovery during the overnight period is significantly higher than that of U.S. common stocks. Further analyses show that the price discovery of ADRs shifts from the trading day to the overnight and the opening prices of ADRs are more efficient if there are more trading activities of underlying shares in home markets. The results suggest that the trading of similar assets in multiple markets over non-overlapping hours improves the price efficiency.

The impact of government interventions on cross-listed securities: Evidence from the COVID-19 pandemic

This paper examines the impact of COVID-19 related governments' interventions on the volatility and liquidity of American depository receipts (ADRs). Using a wide dataset of 387 ADRs from 34 countries around the globe, we provide an examination of the effect of economic and non-economic interventions on the quality of these cross-listed securities. Our results suggest that closures, restrictions, as well as containment health steps implemented during the outbreak period of the pandemic, seem to deteriorate the ADRs' liquidity and stability. The negative impact holds for different control variables and regression specifications and is not subsumed by the inclusion of the daily confirmed cases as a proxy for the severity of the pandemic. The information documented here may assist financial market participants in their risk management. The findings could also be important for policymakers for their preparedness plans in case of future crises.

Chinese and Global ADRs: The US Investor Experience

We study outcomes to ADR (American Depositary Receipt) investments between August 1954 and September 2020, with particular attention to ADRs associated with Chinese firms. Overall, ADRs improved investors’ wealth by $1.03 trillion, with more than a third of this amount attributable to ADRs associated with Chinese firms. A value-weighted portfolio of ADRs associated with Chinese firms earned 14.1% per year since the first Chinese ADR was created in 1993, as compared with 9.9% per year for the overall US stock market over the same period. These data are relevant to current policy discussions focused on Chinese firms listed in the United States.

The impact of arbitrage on market liquidity

I study how arbitrage affects liquidity by analyzing several billion trades in the American Depositary Receipt (ADR) market from 2001 to 2016. Price deviations persist, on average, for 12 min, and mainly arise because of price pressure. Impulse response functions estimated at 1 min intervals indicate that a positive shock to arbitrage—simultaneous trades of the ADR and the home-market share in the opposite direction—decreases deviations and bid-ask spreads. I confirm these findings by exploiting institutional details that create exogenous variation in the impediments to arbitrage across days. Overall, these results suggest that arbitrage decreases price pressure and provides liquidity.

Evidenciação do Contexto Econômico na Relação entre Governança Corporativa e Volatilidade das Ações nas Companhias Abertas Brasileiras

Objetivo : analisar que forma o contexto econômico afeta a relação entre a governança corporativa e a volatilidade das ações das ações das companhias abertas brasileiras listadas no B3 SA - Brasil, Bolsa, Balcão (B3), período de 2010 a 2018.Método : partindo-se de uma pesquisa quantitativa, descritiva e documental, utilizando a volatilidade das ações em base anual como métrica para volatilidade (variável dependente); mecanismos internos (estrutura de propriedade e controle, número de membros do conselho administrativo e fiscal) e mecanismos externos (níveis de governança da B3, American Depositary Receipt e free float ) como proxies de governança corporativa (variável independente de interesse); e variáveis de controle (Produto Interno Bruto - PIB e outras).Originalidade / Relevância : não há consenso em relação à forma que as práticas de governança corporativa afetam a volatilidade das ações, ao se considerar o contexto econômico em que o país se encontra, visto que diferentes proxies podem causar efeitos diversos perante o mercado (Li et al ., 2013; Litov et al ., 2006).Resultados : verificou-se que, de modo geral, os dispositivos adaptam-se com relação à volatilidade das ações apenas quando apareceu em conjunto com a variação do PIB. Já os mecanismos externos não compensam em relação à volatilidade das ações.Contribuições Teóricas/Metodológicas: amplia-se a discussão a respeito da interação das práticas de governança corporativa com a volatilidade dos preços das ações das companhias brasileiras, assim como os diferentes enfoques da tomada de decisão ao se analisar os mecanismos internos e externos de governança corporativa no contexto econômico brasileiro.

Income inequality and the volatility of stock prices

ABSTRACT We examine the link between income inequality and the price volatility of American Depository Receipts (ADRs). Using a large sample of ADRs across 37 countries, we find that income inequality is negatively associated with ADR volatility. To draw stronger causal inferences, we use the implementation of the French ‘Millionaire Tax’ as a negative shock to the perceived level of income inequality in France. In difference-in-difference tests, we find that volatility for French ADRs vis-à-vis non-French ADRs increased by at least 4.85 percentage points after the tax change. Therefore, instead of creating political and social uncertainty, income inequality has a stabilizing influence on the volatility of stock prices, which we argue is a result of higher-skilled human capital.

Dynamic Equicorrelation Analysis of Financial Contagion: Evidence from Latin America Markets

This research employs the multivariate autoregressive moving average-generalized autoregressive conditionally heteroscedastic-dynamic equicorrelation (ARMA-GARCH-DECO) model to identify contagion among Latin American financial markets during financial turmoil period. We analyze the dynamic conditional correlations among 18 American Depositary Receipts (ADR), 8 Exchange Traded Funds (ETF) and 6 Foreign Exchange Rates (Forex). Our sample includes daily closing prices from April 1, 2014, to January 29, 2021, for Argentina, Brazil, Chile, Colombia, Mexico, and Peru. Results find long-run properties in the volatility of most instruments including those belonging to defensive super sector implying that defensive super sector and basic materials are the most impacted sectors during the last financial crises. We present evidence that in times of economic disruption like in the midst of the COVID-19 pandemic, those financial assets do not act as safe harbor investments since they are relatively more correlated during period of financial crises than in normal periods. Our findings have policy implications and are of interest to practitioners who look a better understanding of the dynamics of spillovers among the behavior of emerging financial assets. JEL classification numbers: C58, D53, G15. Keywords: Dynamic equicorrelation model, Latin America, American Depositary Receipts, Exchange Traded Funds, Foreign Exchange Rates, ARMA-GARCH.

American Depository Receipts: The Long-Term U.S. Investor Experience

We study long-run outcomes to those who invested in non-U.S. stocks through American Depository Receipts (ADRs) between August 1954 and September 2020, with particular attention to ADRs associated with Chinese firms. Overall, ADRs improved their investors’ wealth by $1.03 trillion, as compared to a Treasury-bill benchmark. More than a third of this amount was attributable to ADRs associated with Chinese firms. A value-weighted portfolio of ADRs associated with Chinese firms earned 1.64% per month since the first Chinese ADR was created in 1993, as compared to 0.89% per month for the overall U.S. stock market over the same period. These data are relevant to current policy discussions focused on Chinese firms listed in the U.S.

Teoria segmentacji rynku a emisje amerykańskich kwitów depozytowych. Wyniki badań empirycznych spółek notowanych na GPW w Warszawie

Przedmiot badań: W dobie zwiększającej się intensywności procesu globalizacji gospodarczej następuje coraz większa integracja rynków kapitałowych. Spółki notowane na giełdach papie­rów wartościowych starają się dotrzeć do jak największej liczby inwestorów, w tym inwestorów zagranicznych. Możliwość taką daje notowanie akcji lub papierów wartościowych opartych na tych akcjach na rynkach poza granicami kraju emitenta. Jednym z instrumentów umożliwiających przepływ kapitału jest emisja kwitów depozytowych. Kwity te mogą oddziaływać na ceny akcji spółek, w oparciu o które są one emitowane.
 Cel badawczy: Celem niniejszego artykułu jest wykazanie, że emisja Amerykańskich Kwitów Depozytowych (ADR), opartych o akcje spółek notowanych na GPW w Warszawie, w okresie od połowy 2006 r. do połowy 2019 r., spowodowała spadek nadwyżkowych skumulowanych stóp zwrotu tych spółek na rynku pierwotnym.
 Metoda badawcza: Do badania wytypowano 30 spółek, dla których wyemitowane zostały w okresie badawczym amerykańskie kwity depozytowe. Wykorzystując dzienne stopy zwrotu, obliczone na podstawie kursów zamknięcia analizowanych spółek, obejmujące 125 dni, oszaco­wano jednowskaźnikowy model Sharpe’a dla każdej z nich. Następnie wyznaczono nadwyżkowe stopy zwrotu i skumulowane nadwyżkowe stopy zwrotu, przyjmując 25 dni jako okres przed i po zdarzeniu, którym była emisja kwitów.1
 Wyniki: Przeprowadzone badanie potwierdziło założoną hipotezę badawczą o ujemnej zależ­ności pomiędzy okresem emisji kwitów depozytowych a stopami zwrotu akcji. Wyniki takie otrzymano na podstawie całej próby, jak i dla wyodrębnionych podokresów. Skumulowane prze­ciętne nadwyżkowe stopy zwrotu przyjmowały wartości ujemne, przy czym w drugim z wyodrębnionych podokresów osiągały one jeszcze niższe wartości. Można zatem potwierdzić spadek znaczenia teorii segmentacji rynku w kształtowaniu cen akcji na rynku pierwotnym. Wspiera to tezę o występującym w znacznej części gospodarki światowej zjawisku zmniejszających się po­działów na międzynarodowych rynkach finansowych, co dostrzeżone zostało wcześniej również przez innych badaczy ­

Political Relations and Media Coverage

In this article, we find that poor bilateral political relations between the US and other countries negatively influence US media dissemination toward non-US firms with American Depositary Receipts (ADRs). We also show that US media negativity has downward pressure on ADR firms’ home market prices and such negative impact is reduced during the year when political relations are poor—an indication that investors react to real media bias. We conclude the first study by showing that negative US media coverage leads to a higher likelihood of ADR firms terminating their ADRs.

Impact of Chinese ADRs: case study of MAPPAC method analysing China dual listing companies in the US equity market

China concepts stock is the stock in a company that operates in mainland China, and incorporated overseas, giving Chinese businesses access to foreign investment. In the US equity market, investors may have seen China concepts stock listed on the NYSE, NASDAQ, NYSE MKT take the form of American Depositary Receipt (ADR) instead of common stock. The motivation of this paper case by historically Chinese stock exchanges have been closed to foreign investment, which has driven businesses to form China concepts stock. As the country develops its capital markets, China's concepts stocks are expected to be a key driver to China's economic growth. This paper contributes to present the Chinese ADR has higher value investment scarcity and help new economic companies obtain reasonable valuations on the US equity market with more mature, investors are more rational and more suitable for long-term investment and value investment.

Impact of Chinese ADRs : case study of MAPPAC method analysing China dual listing companies in the US equity market

China concepts stock is the stock in a company that operates in mainland China, and incorporated overseas, giving Chinese businesses access to foreign investment. In the US equity market, investors may have seen China concepts stock listed on the NYSE, NASDAQ, NYSE MKT take the form of American Depositary Receipt (ADR) instead of common stock. The motivation of this paper case by historically Chinese stock exchanges have been closed to foreign investment, which has driven businesses to form China concepts stock. As the country develops its capital markets, China's concepts stocks are expected to be a key driver to China's economic growth. This paper contributes to present the Chinese ADR has higher value investment scarcity and help new economic companies obtain reasonable valuations on the US equity market with more mature, investors are more rational and more suitable for long-term investment and value investment.