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ADR valuation and listing of foreign firms in U.S. Equity markets

Author

Listed:
  • Li, Shi
  • Li, Tianze
  • Mittoo, Usha
  • Song, Xiaoping
  • Zheng, Steven Xiaofan

Abstract

We examine the decision to list in the U.S. markets by foreign firms through American Depository Receipts (ADRs). There is a high positive correlation between the valuation of existing ADRs and the number of new ADR listings next year. ADR listing is more likely when existing ADRs are valued higher. The subsequent operating and stock performance of ADR firms listed in hot years is significantly worse than those of ADR firms listed in cold years. These results are consistent with the hypothesis that market timing is an important motivation for foreign firms to list in the U.S. equity markets.

Suggested Citation

  • Li, Shi & Li, Tianze & Mittoo, Usha & Song, Xiaoping & Zheng, Steven Xiaofan, 2019. "ADR valuation and listing of foreign firms in U.S. Equity markets," Journal of International Financial Markets, Institutions and Money, Elsevier, vol. 58(C), pages 284-298.
    • Handle: RePEc:eee:intfin:v:58:y:2019:i:c:p:284-298
    DOI: 10.1016/j.intfin.2018.11.014
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    More about this item

    Keywords

    U.S. listing; ADR; Valuation; Operating performance; Market timing;
    All these keywords.

    JEL classification:

    • G14 - Financial Economics - - General Financial Markets - - - Information and Market Efficiency; Event Studies; Insider Trading
    • G15 - Financial Economics - - General Financial Markets - - - International Financial Markets
    • G32 - Financial Economics - - Corporate Finance and Governance - - - Financing Policy; Financial Risk and Risk Management; Capital and Ownership Structure; Value of Firms; Goodwill

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