Institutional Investors' Participation in Foreign Firms: Evidence from ADRs

International Finance Review, Volume 12, pp.145-168 (2013)

Posted: 28 May 2013

See all articles by Narjess Boubakri

Narjess Boubakri

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

Olfa Hamza

University of Quebec at Montreal (UQAM) - Faculty of Management (ESG)

Maher Kooli

University of Quebec at Montreal (UQAM) - School of Management (ESG)

Date Written: May 27, 2013

Abstract

Purpose – Study the firm-level and country-level determinants of US institutional investors' holdings in American Depositary Receipts (ADRs) from emerging markets.

Methodology/approach – We use a sample of 112 firms from emerging markets that listed as ADRs between 1990 and 2005. Rather than adopting the issuer's perspective, we take in this study the point of view of the investor and we focus on the US institutional investors' participation in ADR firms.

Findings – We find that institutional investors hold higher stakes in foreign firms that are listed on more restrictive exchanges, in large, privatized, more liquid, and more transparent firms. Mutual investors and other institutional investors also prefer firms from countries with weaker institutional environments and from civil law legal tradition. Controlling for country-level determinants increases significantly the explanatory power of the model.

Social implications – Our results have important implications for firms from emerging markets seeking to attract foreign institutional investors.

Originality/value of the chapter – We focus on the motivations of investors when they choose to invest in the ADR, rather than on the ADR issuer motivation. In addition, we consider all types of institutional investors that acquire a participation in an ADR firm.

Suggested Citation

Boubakri, Narjess and Hamza, Olfa and Kooli, Maher, Institutional Investors' Participation in Foreign Firms: Evidence from ADRs (May 27, 2013). International Finance Review, Volume 12, pp.145-168 (2013). Available at SSRN: https://ssrn.com/abstract=2270861

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

Olfa Hamza

University of Quebec at Montreal (UQAM) - Faculty of Management (ESG) ( email )

315 Sainte-Catherine Est
Montreal, Quebec H2X3X2
Canada
514-987-3000#4251 (Phone)

Maher Kooli (Contact Author)

University of Quebec at Montreal (UQAM) - School of Management (ESG) ( email )

315 rue Sainte-Catherine Est
Montreal, Quebec H3X 3X2
Canada
514 987 3000, 2082 (Phone)
514 987 0422 (Fax)

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