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Determinants of ADR Returns before and after Domestic Stock Seasoned Equity Offerings: Evidence from Asian and Latin American Emerging Markets

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  • Chien-Chiang Lee
  • Mei-Ping Chen
  • Chun-An Li
  • Chi-Hung Chang

Abstract

This paper examines the critical determinants of American depository receipt (ADR) returns before and after domestic stock seasoned equity offerings (SEOs) for Asian and Latin American emerging economies during 1990--2007, which has never been probed in related issues. We employ the Time Series Cross Section Regressions and General Method of Moments methods to document that domestic stock returns play a vital role in explaining Latin American ADR returns, while US investor sentiment is crucial in explaining Asian ADR returns. Local investor sentiment is found to be considerably important than domestic stock returns in Asian ADR returns, while Latin American local investor sentiment (US investor sentiment) is more important before (after) domestic stock SEOs. The results do not support the view that ADR-reconciled earnings per share (EPS) and stock EPS provide significant information to explain ADR returns in Latin American and Asian emerging markets both before and after SEOs. Furthermore, international market differences in a specific geography should be considered when diversifying investments and efficiency accounting communication with accounting convergence does not need to be emphasized.

Suggested Citation

  • Chien-Chiang Lee & Mei-Ping Chen & Chun-An Li & Chi-Hung Chang, 2011. "Determinants of ADR Returns before and after Domestic Stock Seasoned Equity Offerings: Evidence from Asian and Latin American Emerging Markets," Journal of Business Economics and Management, Taylor & Francis Journals, vol. 12(2), pages 248-277, February.
    • Handle: RePEc:taf:jbemgt:v:12:y:2011:i:2:p:248-277
    DOI: 10.3846/16111699.2011.573264
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    Cited by:

    1. Janda, Karel & Rausser, Gordon & Svárovská, Barbora, 2014. "Can investment in microfinance funds improve risk-return characteristics of a portfolio?," Department of Agricultural & Resource Economics, UC Berkeley, Working Paper Series qt6651g29v, Department of Agricultural & Resource Economics, UC Berkeley.
    2. Sheena Chhabra & Ravi Kiran, 2022. "Impact of information on winners' curse and long run performance of initial public offerings," International Journal of Finance & Economics, John Wiley & Sons, Ltd., vol. 27(1), pages 975-992, January.
    3. O'Hagan-Luff, Martha & Berrill, Jenny, 2015. "Why stay-at-home investing makes sense," International Review of Financial Analysis, Elsevier, vol. 38(C), pages 1-14.

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