ADR Valuation and Listing of Foreign Firms in U.S. Equity Markets

44 Pages Posted: 14 Feb 2019

See all articles by Shi Li

Shi Li

University of Manitoba - Asper School of Business

Tianze Li

University of Manitoba - Department of Accounting and Finance

Usha R. Mittoo

University of Manitoba - Department of Accounting and Finance

Xiaoping Song

University of Manitoba - Asper School of Business

Steven Xiaofan Zheng

University of Manitoba - Asper School of Business

Date Written: October 6, 2018

Abstract

We examine the decision to list in the U.S. markets by foreign firms through American Depository Receipts (ADRs). There is a high positive correlation between the valuation of existing ADRs and the number of new ADR listings next year. ADR listing is more likely when existing ADRs are valued higher. The subsequent operating and stock performance of ADR firms listed in hot years is significantly worse than those of ADR firms listed in cold years. These results are consistent with the hypothesis that market timing is an important motivation for foreign firms to list in the U.S. equity markets.

Keywords: U.S. Listing, ADR, Valuation, Operating Performance, Market Timing

JEL Classification: G14, G15, G32

Suggested Citation

Li, Shi and Li, Tianze and Mittoo, Usha R. and Song, Xiaoping and Zheng, Steven Xiaofan, ADR Valuation and Listing of Foreign Firms in U.S. Equity Markets (October 6, 2018). Journal of International Financial Markets, Institutions and Money, Vol. 58, 2019, Available at SSRN: https://ssrn.com/abstract=3327875

Shi Li

University of Manitoba - Asper School of Business ( email )

181 Freedman Crescent
Winnipeg, Manitoba R3T 5V4
Canada

Tianze Li

University of Manitoba - Department of Accounting and Finance ( email )

Faculty of Management
Winnipeg, MB R3T 5V4
Canada

Usha R. Mittoo

University of Manitoba - Department of Accounting and Finance ( email )

Faculty of Management
Winnipeg, MB R3T 5V4
Canada

Xiaoping Song

University of Manitoba - Asper School of Business ( email )

181 Freedman Crescent
Winnipeg, Manitoba R3T 5V4
Canada

Steven Xiaofan Zheng (Contact Author)

University of Manitoba - Asper School of Business ( email )

Department of Accounting and Finance
Winnipeg, Manitoba R3T 5V4
Canada
204-474-7933 (Phone)

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