The informational content of ADR mispricing

Klaus S. Beckmann, Thanh Ngo and Daphne Wang ()

Journal of Multinational Financial Management, 2015, vol. 32-33, 1-14

Abstract: We propose that the persistence in ADR mispricing is due to information asymmetry associated with the underlying stocks. We employ three alternative proxies for the information asymmetry including the investment freedom score of the underlying stock country, the listing level of the ADR, and the idiosyncratic risks of the underlying stock. We find that mispricing is higher for underlying stocks from countries with low investment freedom, for level I ADRs, and for underlying stocks with higher idiosyncratic risk. Information asymmetry is priced accordingly in ADR valuations.

Keywords: Investment freedom; ADRs; Mispricing; Information asymmetry (search for similar items in EconPapers)
JEL-codes: G12 G14 G15 (search for similar items in EconPapers)
Date: 2015
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Citations: View citations in EconPapers (9)

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Persistent link: https://EconPapers.repec.org/RePEc:eee:mulfin:v:32-33:y:2015:i::p:1-14

DOI: 10.1016/j.mulfin.2015.03.002

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