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The home stigma : adverse selection in ADRs and the home capital market environment

Zhu, Qiaoqiao (2009) The home stigma : adverse selection in ADRs and the home capital market environment. In Proceedings of 2009 FMA Annual Meeting, University of South Florida, Reno, Nevada, pp. 1-40.

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Abstract

We investigate whether characteristics of the home country capital environment, such as information disclosure and investor rights protection continue to affect ADRs cross-listed in the U.S. Using microstructure measures as proxies for adverse selection, we find that characteristics of the home markets continue to be relevant, especially for emerging market firms. Less transparent disclosure, poorer protection of investor rights and weaker legal institutions are associated with higher levels of information asymmetry. Developed market firms appear to be affected by whether or not home business laws are common law or civil law legal origin. Our finding contributes to the bonding literature. It suggests that cross-listing in the U.S. should not be viewed as a substitute for improvement in the quality of local institutions, and attention must be paid to improve investor protection in order to achieve the full benefits of improved disclosure. Improvement in the domestic capital market environment can attract more investors even for U.S. cross-listed firms.

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ID Code: 32420
Item Type: Conference Paper
Keywords: Information Asymmetry, Disclosure, Governance, Cross-listing
Subjects: Australian and New Zealand Standard Research Classification > ECONOMICS (140000) > APPLIED ECONOMICS (140200) > International Economics and International Finance (140210)
Australian and New Zealand Standard Research Classification > ECONOMICS (140000) > APPLIED ECONOMICS (140200) > Financial Economics (140207)
Divisions: Current > QUT Faculties and Divisions > QUT Business School
Current > Schools > School of Economics & Finance
Copyright Owner: Copyright 2009 Qiaoqiao Zhu
Deposited On: 01 Jun 2010 13:54
Last Modified: 05 Jan 2011 23:59

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