ADR Holdings of U.S.-Based Emerging Market Funds

Posted: 9 Oct 2010

See all articles by Reena Aggarwal

Reena Aggarwal

Georgetown University - Robert Emmett McDonough School of Business ; European Corporate Governance Institute (ECGI)

Sandeep Dahiya

Georgetown University - Department of Finance

Leora F. Klapper

World Bank; World Bank - Development Research Group (DECRG)

Multiple version iconThere are 2 versions of this paper

Date Written: November 1, 2006

Abstract

What motivates investors to hold American Depositary Receipts (ADRs) rather than the underlying stock of U.S. listed foreign firms? We analyze the investment allocation decision of actively-managed emerging market mutual fund managers. Although legal provisions are typically assumed to affect ADR and its underlying domestic shares equally, investors holding ADRs may have a higher level of legal protection as these securities are issued and traded in the U.S. We find that ADRs are the preferred mode of holdings if the local market of the issuer has weak investor protection, low liquidity and high transaction costs.

Keywords: Emerging markets, Portfolio selection, Cross-listed stocks, ADRs

JEL Classification: G11, G15, G18, G23, K22

Suggested Citation

Aggarwal, Reena and Dahiya, Sandeep and Klapper, Leora F., ADR Holdings of U.S.-Based Emerging Market Funds (November 1, 2006). Journal of Banking and Finance, Vol. 31, No. 6, 2007, Available at SSRN: https://ssrn.com/abstract=1689708

Reena Aggarwal (Contact Author)

Georgetown University - Robert Emmett McDonough School of Business ( email )

3700 O Street, NW
Washington, DC 20057
United States
202-687-3784 (Phone)
202-687-0798 (Fax)

HOME PAGE: http://explore.georgetown.edu/people/aggarwal/

European Corporate Governance Institute (ECGI) ( email )

c/o the Royal Academies of Belgium
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1000 Brussels
Belgium

Sandeep Dahiya

Georgetown University - Department of Finance ( email )

3700 O Street, NW
Washington, DC 20057
United States
202-687-3832 (Phone)

Leora F. Klapper

World Bank ( email )

1818 H Street, N.W.
Washington, DC 20433
United States
202-473-8738 (Phone)

HOME PAGE: http://econ.worldbank.org/staff/lklapper

World Bank - Development Research Group (DECRG)

1818 H. Street, N.W.
MSN3-311
Washington, DC 20433
United States

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