Degustando La Bombonera de ADRs (Tasting the ADR chocolate box)

Abstract: Title: Degustando La Bombonera de ADRs - A study on the determinants of the market-adjusted return of Latin American ADRs issued between 1999 and 2014 Seminar date: 2018-01-11 Course: FEKH89, Corporate Finance Degree Project,Undergraduate level, 15 ECTS Authors: Nino Dahl Merckling, Dustin Said, Erik Sjöholm Advisor: Anamaria Cociorva Key words: ADR, Latin America, Introduction Puzzle, 3-market-adjusted performance year Performance, Multivariate Regression Purpose: The purpose of this thesis is to analyze the medium run (defined as 36 months) market-adjusted returns of ADRs of Latin American origin issued since 1999. Through running a multivariate regression, the authors seek to establish significant relationships between the medium run returns and the seven selected independent variables. The general aim of the study is to provide relevant, recent research on the determinants of Latin American ADR IPOs in the period 1999 to 2014, research that not only reduces the literature gap between ADR and IPO literature but also is useful to the prospective investor. Methodology: The authors employ a deductive quantitative method, developing hypotheses and conducting an event study. Through the use of multivariate regression and significance tests, the relationships between the accumulated adjusted return (CAR) and several variables cited in IPO literature as potential performance determinants are examined and analyzed. Theoretical perspectives: Relevant research has mainly been conducted by American researchers on American markets. The theoretical basis of this thesis is primarily concerned with IPOs, and secondly with ADRs. Empirical foundation: The results are based on a sample of 41 ADRs of Latin American origin, issued between 1999 and 2014, traded on the NYSE and NASDAQ. The data has been retrieved from Thompson Reuters Datastream or from the websites of the underlying firms. Conclusions: IPO literature can successfully be applied to explain the market-adjusted performance of Latin American ADR IPOs. The authors find the introduction timing, ADR country and ADR industry to be the most important performance determinants.