An accounting study of American depositary receipts
Hubbard, Daniel Julian
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This study uses the tools of accounting research in an exploratory examination of American Depositary Receipts (ADRs). ADRs are registered certificates that represent specified amounts of foreign stocks held in trust by the banks issuing the ADRs. They are used to avoid the day-to-day problems created by international securities transactions. The empirical portion of this study considers three research areas linking ADRs and accounting. The first question considers whether ADR firms show financial accounting information that is characteristically different from that for non-ADR firms. The major conclusion is that corporate size is the predominant distinguishing factor. The second question is whether the portion of the periodic returns on ADR investments caused by foreign currency exchange effects is significant. The major conclusion to this section is that foreign exchange effects can significantly affect ADR returns, but not in a consistent manner. The third area examines whether ADR returns are more closely correlated with the American markets on which they trade or with the foreign markets on which their underlying shares trade. This portion of the study shows that every possible correlation combination exists among the sample ADRs. In addition to considering these empirical questions, this study includes a thorough historical investigation of the origin and evolution of the ADR as a financial instrument.
- Doctoral Dissertations