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Cross-listing effect on information environment of foreign firms: ADR type and country characteristics

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  • Lee, Hei Wai
  • Valero, Magali
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    Abstract

    We examine sources of improvement in the information environment of foreign firms that cross-listed in the United States as American Depositary Receipts (ADRs) between 1995 and 2005. We analyze changes in the number and dispersion of analyst recommendations on foreign firms following their cross-listing. We find increases in analyst coverage intensity across all four types of ADR programs, especially among firms that were listed on organized exchanges (the listing effect), and those that adopted capital raising ADR programs (the financing effect). Our results suggest that the listing effect is more persistent than the financing effect. On the other hand, reductions in recommendation dispersion are observed mainly for firms that choose non-capital raising ADRs and those from emerging markets. Overall, improvements in information environment are more profound among foreign firms originating from countries with greater information asymmetry, namely, countries with weaker legal tradition and rule of law, and countries that are less familiar to U.S. investors.

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    Bibliographic Info

    Article provided by Elsevier in its journal Journal of Multinational Financial Management.

    Volume (Year): 20 (2010)
    Issue (Month): 4-5 (December)
    Pages: 178-196

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    Handle: RePEc:eee:mulfin:v:20:y:2010:i:4-5:p:178-196

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    Web page: http://www.elsevier.com/locate/mulfin

    Related research

    Keywords: Cross-listing Information environment Analysts Recommendation dispersion;

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    Cited by:
    1. Georgieva, Dobrina & Jandik, Tomas, 2012. "Alternative paths of convergence toward U.S. market and legal regulations: Cross-listing vs. merging with U.S. bidders," Journal of Multinational Financial Management, Elsevier, vol. 22(5), pages 230-251.
    2. Daugherty, Mary & Georgieva, Dobrina, 2011. "Foreign cultures, Sarbanes-Oxley Act and cross-delisting," Journal of Multinational Financial Management, Elsevier, vol. 21(4), pages 208-223, October.

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