Examining the Returns of American Depository Receipts: Evidence From Emerging and Developed Markets

The purpose of this article is to explain the returns of American Depository Receipts (ADRs), comparing the results across emerging and developed markets. Using a sample of 167 ADRs from 14 emerging and 17 developed markets (31 markets in total) for the period 2000-2004, we found variations in the impacts of specific variables and in the explanatory power of models associated with the annual holding-period return of firms. Dividing ADRs into emerging and developed markets suggests that firm size and local market conditions influenced returns in the two groups in similar ways. However, firm-specific business risk and country-specific economic risk are only important to emerging markets' ADRs, while country-specific exchange-rate variables are more important to developed markets' ADRs. (C) 2009 Wiley Periodicals, Inc.