Two Essays on the Role of Information in the Interaction between American Depository Receipts and Their Home Shares: Information Transfer and Issuer Decisions

American Depository Receipts (ADRs) represent shares of foreign firms that are issued and traded in the U.S. Since an ADR and its underlying shares represent ownership interest of the same firm, they should be perfect substitutes in a perfect market. However, market imperfections such as differences in information environment, liquidity, investment and trading restrictions, taxes, control right, corporate governance might make them less-than-perfect substitutes. These imperfections, on the other hand, also present opportunities for research. This dissertation consists of two essays on ADRs, both related to the effects of less-thanperfect information. Specifically, the first essay examines the return and volatility transfers between ADRs and their underlying home shares. Our investigation differs from the previous studies in that we cover substantially more countries and that we attempt to explain the variations in the extents of transfer effects both across firms and across countries. Various hypotheses are developed, based on the premise that barriers associated with trading, investments, and corporate governance would lower the extent or effectiveness of transfers. Overall, our empirical results support these hypotheses. The second essay takes the viewpoint of the issuing firms. Supposedly, an issuer's timing and dollar amount raised depend on the conditions of three markets: its home equity market, the U.S. equity market, and the currency market. From purely the standpoint of information accessibility, ADR issuers are likely to time their issues or set their amounts with respect to the conditions of the home equity market and/or currency market, with which they are more familiar. On the other hand, issuers typically employ the assistance of U.S. investment banks, and therefore they may be well-informed about the U.S. equity market. This is largely an empirical issue. Generally, our empirical results are mixed, but there is somewhat stronger evidence for the U.S. equity market being more important when setting the issue amount. There is also evidence that suggests regulations having influences on such activities.

Name thesis:degree_name

Ph.D.

Level thesis:degree_level

Dissertation

Discipline thesis:degree_discipline

Economics and Finance

Year

2008

Author dc:creator

• Cheung, Oi Lin

Contributors dc:contributor

• Wei, Peiwhang Philip
• Mukherjee, Tarun K.
• Krishnaswami, Sudha

• ADR
• Information Transmission
• Return Transfer
• Volatility Transfer
• Investment Restriction
• Investor Protection
• Ownership
• GARCH Model
• Market Timing
• Information Asymmetry
• Country Regulation

Repository record dc:identifier

https://scholarworks.uno.edu/td/855

OAI identifier oai:identifier

oai:scholarworks.uno.edu:td-1835