Abstract

http://ssrn.com/abstract=394001
 
 

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The Ex-Dividend Day Behavior of American Depository Receipts


Larry R. Gorman


California Polytechnic State University

Arvind Mahajan


Texas A&M University - Department of Finance

Robert A. Weigand


Washburn University School of Business


Journal of Multinational Financial Management, Forthcoming

Abstract:     
We compare the ex-dividend day stock returns and trading volume of foreign stocks that trade in U.S. markets as American Depository Receipts (ADRs) with the ex-day returns and volume of a matched sample of U.S. stocks. This experiment allows us to investigate whether differences in the way dividends are paid and/or foreign currency risk affect the stock returns and trading volume of ADRs on the ex-dividend day. If these factors inhibit dividend capture in ADRs, then ADRs should earn larger ex-day returns than U.S. stocks, and their ex-day trading volume should be lower. We present evidence consistent with these hypotheses. The results of a cross-sectional regression analysis of ex-day returns and volume are not consistent with a foreign exchange risk premium suppressing dividend capture in ADRs, however, suggesting that differences in dividend payment policies account for the lower level of dividend capture in ADRs.

Keywords: American depository receipts, ADRs, Dividends, Ex-dividend day, Foreign exchange risk, investments, stock market, trading

JEL Classification: G15, G35, F31

Accepted Paper Series


Not Available For Download

Date posted: May 27, 2003  

Suggested Citation

Gorman, Larry R. and Mahajan, Arvind and Weigand, Robert A., The Ex-Dividend Day Behavior of American Depository Receipts. Journal of Multinational Financial Management, Forthcoming. Available at SSRN: http://ssrn.com/abstract=394001

Contact Information

Larry Gorman
California Polytechnic State University ( email )
College of Business
Department of Finance
San Luis Obispo, CA 93407
United States
805-756-1312 (Phone)
805-756-1473 (Fax)
Arvind Mahajan
Texas A&M University (TAMU) - Department of Finance ( email )
430 Wehner
College Station, TX 77843-4218
United States
979-845-4876 (Phone)

Robert A. Weigand (Contact Author)
Washburn University School of Business ( email )
Topeka, KS
United States
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