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We study European banks' demand for short-term funds (liquidity) during the summer 2007 subprime market crisis. We use bidding data from the European Central Bank's auctions for one-week loans, their main channel of monetary policy implementation. Our analysis provides a high-frequency, disaggregated perspective on the 2007 crisis, which was previously studied through comparisons of collateralized and uncollateralized interbank money market rates which do not capture the heterogeneous impact of the crisis on individual banks. Through a model of bidding, we show that banks' bids reflect their cost of obtaining short-term funds elsewhere (e.g., in the interbank market) as well as a strategic response to other bidders. The strategic response is empirically important: while a naïve interpretation of the raw bidding data may suggest that virtually all banks suffered an increase in the cost of short-term funding, we find that, for about one third of the banks, the change in bidding behavior was simply a strategic response. We also find considerable heterogeneity in the short-term funding costs among banks: for over one third of the bidders, funding costs increased by more than 20 basis points, and funding costs vary widely with respect to the country-of-origin. The funding costs we estimate using bidding data are also predictive of market- and accounting-based measures of bank performance, reinforcing the usefulness of \"revealed preference\" information contained in bids.

PurposeThis study tests the signaling and tunneling models of dividend policies by examining the relationship between the ownership structure and the dividend payout in a setting where strong institutional governance and weak firm-level governance coexist.Design/methodology/approachChinese American Depository Receipts (ADRs) listed in the US offer an excellent opportunity to study dividend policy where strong institutional governance and weak firm-level governance coexist. Using a sample of 161 Chinese ADRs from 2004 to 2018, this study examines the relationship between the firm's ownership structure and cash dividend policy.FindingsThis study shows that high levels of controlling shareholder ownership and high levels of state ownership are associated with high dividend payouts. A high level of controlling shareholder ownership has a negative effect on its firm value. Dividend payments in those firms mitigate the negative effect, consistent with the signaling (substitution) model. A high level of state ownership is beneficial to its firm value. However, high dividend payment in those firms decreases the benefit, supporting the tunneling model.Practical implicationsThis study covers 161 Chinese ADRs listed in the US with a total market capitalization of over$2 trillion and reveals that dividend tunneling could occur in Chinese government controlled ADRs. Findings in this study would offer valuable insights for US investors and regulators.Originality/valueThis paper extends the tunneling hypothesis to the topic of dividend policy in a setting where strong institutional governance and weak firm-level governance coexist. This study shows that tunneling through dividends can happen among Chinese government controlled ADRs in the US. It also complements the literature by extending the examination of the dividend tunneling model from a relatively small universe of master limited partnership (Atanssov and Mandell, 2018) to a larger universe of Chinese ADRs listed in the US with a total market capitalization over $ 2 trillion US dollars.

The issue of liquidity and the under development of the Organization of Islamic Cooperation (OIC) stock markets have been a hindrance factor for companies in those countries to seek fund and capital. Due to this reason, many companies choose Depositary Receipts (DRs) to raise capital internationally. Thus, this study aims at examining the financial implications of cross listing via the existing Depositary Receipts (DRs) on stock market development. This study employs a dynamic panel model covers sample of 146 firms from 17 OIC countries that are cross-listed as American Depositary Receipts (ADRs) or Global DRs from 1993 to 2016. The findings reveal that growth and expansion of international cross listings via DRs have a positive impact on domestic stock market. This study provides insights to OIC stock markets that consider accommodating Islamic Depositary Receipts (IDRs) in the future.

Using Granger causality test, we investigate the lead-lag relation between volume and volatility in 14 Chinese ADRs and those of their underlying H-shares. We consider volume as denoting liquidity. We model and forecast volatility using a TARCH model and find evidence of leverage effect and persistence in volatility among the ADRs and H-shares. We document significant but asymmetric bidirectional Granger causality between volume and volatility in ADRs and their underlying H-shares. The asymmetry seems to have declined in recent years, during the latter half of the sample period. We conclude that the relation between liquidity denoted by volume and volatility are time- varying and asymmetric between ADRs and their underlying H-shares.

One of the objectives of Directive 2013/11/EU was to promote high-quality consumer alternative dispute resolution (ADR) schemes in the European Union (EU) through the creation of certification processes and regular monitoring by Member States. To obtain and keep certification, ADR bodies must continuously comply with several binding requirements set down in the Directive testifying–among other things–of their impartiality, expertise, transparency, accessibility, as well as of the fairness, timeliness and effectiveness of their procedures. The objective of this regulatory architecture was to trigger some long-term effects on the procedural design and functioning of ADR bodies and to enhance their credibility and legitimacy vis-à-vis consumers and traders. As such, the new rules have aimed to respond to the criticisms sometimes expressed about the way ADR providers operate, in particular concerns regarding schemes’ lack of independence, limited accountability and possible effects on due process. Yet, doubts have been expressed about the ability of the Directive to secure a consistent approach fully supporting high-quality ADR in the EU. This paper intends to test these doubts against facts and evidence. Based notably on replies to a questionnaire sent to Competent Authorities, it zooms in on experiences in two Member States, namely France and the United Kingdom (UK) (more specifically for the latter in the civil aviation and non-regulated sectors). It highlights how the binding quality criteria have been working in practice and the impacts that the Directive has had on ADR bodies in those Member States and sectors. It sheds light on several persisting issues, and makes some policy recommendations, which may be relevant for policymakers not only in France and the UK, but also in other Member States and at the EU level when further developing a sustainable framework for high-quality ADR. In 2019, the European Commission is expected to publish a report on the implementation of the Consumer ADR Directive in all Member States. This contribution may be viewed as a first small step in that direction.

This paper examines and compares the dividend policies of American depository receipt (ADR) firms and U.S. firms and identifies the factors that determine these policies for both types of companies. We find that ADR firms have higher dividend yields than U.S. firms, while U.S. firms have higher stock repurchase ratios than ADR firms. Results from univariate comparisons and multivariate analysis show that the determining factors of dividend payout and stock repurchases differ between these two types of firms. This finding holds for the robustness check conducted in this study. This paper provides further evidence regarding dividend policies of ADR firms and sheds light on the differences in dividend policies between non-U.S. firm and U.S. firms.

We conjecture that macro-level institutions affect equity trading costs through their impact on information risk and investor participation. In a study of trading costs for 412 NYSE-listed American Depository Receipts (ADRs) from 44 countries, we find that, after controlling for firm-level determinants of trading costs, effective spreads and price impact of trades are significantly lower for stocks from countries with better ratings for judicial efficiency, accounting standards, and political stability. Trading costs are significantly higher for stocks from French civil law countries than from common law countries. Overall, we conclude that improvements in legal and political institutions will lower the cost of liquidity in financial markets.

We investigate the volume impact on volatility for 14 Chinese ADRs and their underlying H-shares. We decompose volume into expected and unanticipated components and include those as determinants of conditional volatility in a bivariate GARCH model for each ADR and its underlying H-share. Expected volume denotes liquidity, while unanticipated volume implies information content in volume. The GARCH model fits the data well. In addition to the conventional GARCH parameters, for ADRs and their underlying H-shares, expected and unanticipated volumes significantly but asymmetrically affect both the variance and the covariance functions. Further, volume components asymmetrically impact volatility of ADRs and H-shares in high- versus low-liquidity and high- versus low-liquidity-risk buckets denoted by volume and standard deviation of volume, respectively.

The literature provides extensive evidence for seasonality in stock market returns, but is almost non-existent concerning the potential seasonality in American depository receipts (ADRs). To fill this gap, this paper aims to examine a number of seasonal effects in the market for ADRs. Design/methodology/approach The paper examines four ADRs for the period from April 1999 to March 2017 to look for signs of eight important seasonal anomalies. The authors follow the standard methodology of using dummy variables for the time period of interest to capture excess returns. For comparison, the same analysis on two US stock market indices is conducted. Findings The results show the presence of a highly significant pre-holiday effect in all return series, which does not seem to be justified by risk. Moreover, turn-of-the-month effects, monthly effects and day-of-the-week effects were detected in some of the ADRs. The seasonality patterns under analysis tended to be stronger in emerging market-based ADRs. Research limitations/implications Overall, the results show that significant seasonal patterns were present in the price dynamics of ADRs. Moreover, the findings lend support to the idea that emerging markets are less efficient than developed stock markets. Originality/value This is the most comprehensive study to date for indication of seasonal anomalies in the market for ADRs. The authors use an extensive sample that includes recent significant financial events such as the 2007/2008 financial crisis and consider ADRs with different characteristics, which allows to draw comparisons between the differential price dynamics arising in developed market-based ADRs and in the ADRs whose underlying securities are traded in emerging markets.