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U. S. Investors' Perceptions of Corporate Control in Mexico: Evidence from Sibling ADRs

Published online by Cambridge University Press:  06 April 2009

J. Michael Pinegar  and
R. Ravichandran
J. Michael Pinegar
Affiliation:
jmp5@email.byu.edu, Marriott School of Management, Brigham Young University, Provo, UT 84602;
R. Ravichandran
Affiliation:
Indian School of Business, Gachibowli, Hyderabad 500019, India.
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Abstract

We examine the relative prices of sibling American Depositary Receipts (ADRs). These ADRs are issued against classes of shares with different voting rights that are issued by the same foreign firm. Though superior and inferior voting siblings begin trading in the U. S. at nearly equal values, prices quickly separate. For non-Mexican issues, superior voting ADRs command a premium. For Mexican issues, superior voting shares trade at a discount. The Mexican discount is inconsistent with the benefits of U. S. listing discussed in other recent studies and cannot be explained by differences in cash flow rights, systematic risk, liquidity, voting control of major blockholders, or ownership restrictions. Our analysis suggests, however, that control for our Mexican firms has shifted to creditors and competitors, thus, eroding equity voting premiums.

Type
Research Article
Information
Journal of Financial and Quantitative Analysis , Volume 38 , Issue 1 , March 2003 , pp. 213 - 230
Copyright
Copyright © School of Business Administration, University of Washington 2003

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