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Published by: Allied Business Academies
Originally published in: "Journal of International Business Research", 2015
Length: 8 pages

Abstract

We explore whether country characteristics influence a firm's decision to internationalize for increased visibility or to raise funds - that is, what influences the decision to issue Level II versus Level III American Depositary Receipts (ADRs). We apply panel probit and tobit models to a panel of 20 countries that spans 368 exchange-listed ADR issues during 1996-2010. Our results indicate that the domestic country's macroeconomic environment does play a role in firm's choice between Level II and Level III ADRs. Specifically, lower inflation and higher credit available to the private sector are associated with increases in Level II ADR issuance while improvements in corporate governance and stock market development are associated with issuance of Level III ADRs.

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Abstract

We explore whether country characteristics influence a firm's decision to internationalize for increased visibility or to raise funds - that is, what influences the decision to issue Level II versus Level III American Depositary Receipts (ADRs). We apply panel probit and tobit models to a panel of 20 countries that spans 368 exchange-listed ADR issues during 1996-2010. Our results indicate that the domestic country's macroeconomic environment does play a role in firm's choice between Level II and Level III ADRs. Specifically, lower inflation and higher credit available to the private sector are associated with increases in Level II ADR issuance while improvements in corporate governance and stock market development are associated with issuance of Level III ADRs.

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