The Choice of ADRs

54 Pages Posted: 27 Aug 2007 Last revised: 14 Oct 2008

See all articles by Narjess Boubakri

Narjess Boubakri

American University of Sharjah - School of Business and Management; HEC Montreal - Department of Finance

Jean-Claude Cosset

HEC Montreal

Anis Samet

American University of Sharjah - School of Business and Management

Date Written: March 2008

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.

Keywords: ADR, bonding, governance, Sarbanes-Oxley Act

JEL Classification: G15, G32, G34, K00

Suggested Citation

Boubakri, Narjess and Cosset, Jean-Claude and Samet, Anis, The Choice of ADRs (March 2008). Paris December 2007 Finance International Meeting AFFI - EUROFIDAI. Available at SSRN: https://ssrn.com/abstract=1006839 or http://dx.doi.org/10.2139/ssrn.1006839

Narjess Boubakri

American University of Sharjah - School of Business and Management ( email )

P.O. Box 26666
Sharjah
United Arab Emirates

HOME PAGE: http://www.aus.edu

HEC Montreal - Department of Finance ( email )

3000 Chemin de la Cote-Sainte-Catherine
Montreal, Quebec H3T 2A7
Canada

Jean-Claude Cosset (Contact Author)

HEC Montreal ( email )

3000, Chemin de la Côte-Sainte-Catherine
Montreal, Quebec H3T 2A7
Canada
514-340-6872 (Phone)
514-340-6987 (Fax)

Anis Samet

American University of Sharjah - School of Business and Management ( email )

P.O. Box 26666
Sharjah
United Arab Emirates

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