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The Choice of ADRsNarjess BoubakriAmerican University of Sharjah - School of Business and Management; HEC Montreal - Department of Finance Jean-Claude CossetHEC Montreal Anis SametAmerican University of Sharjah - School of Business and Management March 2008 Paris December 2007 Finance International Meeting AFFI - EUROFIDAI Abstract: We study the determinants of a firm's decision to issue one of the four available ADR programs (Level I, Level II, Level III, and Rule 144A). We find that the firm's attributes (size, income, asset growth, leverage, privatization, ownership structure, and country-of-origin) and the firm's home-country institutional variables (accounting rating and legal protection of minority shareholders) condition this choice. We also examine the issuing activity and the determinants of the ADR choice before and after the enactment of the Sarbanes-Oxley (SOX) Act. Following this structural change, we provide evidence of a reallocation between ADR programs. Compared to the pre-SOX period, firms from emerging markets, and those from countries with weak legal protection of minority shareholders, are more likely after SOX to choose Rule 144A and Level III, respectively.
Number of Pages in PDF File: 54 Keywords: ADR, bonding, governance, Sarbanes-Oxley Act JEL Classification: G15, G32, G34, K00 working papers seriesDate posted: August 27, 2007 ; Last revised: October 14, 2008Suggested CitationContact Information
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