ADR holdings of US-based emerging market funds

What motivates investors to hold American Depositary Receipts (ADRs) rather than the underlying stock of US listed foreign firms? We analyze the investment allocation decision of actively-managed emerging market mutual fund managers. Although legal provisions are typically assumed to affect ADR and its underlying domestic shares equally, investors holding ADRs may have a higher level of legal protection as these securities are issued and traded in the US. We find that ADRs are the preferred mode of holdings if the local market of the issuer has weak investor protection, low liquidity and high transaction costs.     

Markets versus institutions in developing countries: National attributes as determinants

While there is some discussion of national preferences for banking versus financial markets, there is little research on how national financing preferences are determined by legal, cultural, and other national characteristics. Using panel analysis on data for a recent eight-year period for sixteen emerging-economies, this paper documents that, in such countries, an increased predilection for equity markets is associated with increased prevention of corruption and countries being Asian. A decreased predilection for financing via equity markets is associated both with greater power of bank regulators and with more globalization and an English legal origin. One interpretation of our results suggests that while common law promotes both banking and financial markets, common law and societal openness act to promote banking more than markets in less developed environments. Our results have important public policy implications given that financial systems are still evolving in developing countries.     

An exploratory procedure for identifying influential subgroups in linear regression

In some linear regression problems samples may be unwittingly drawn from a population that is heterogeneous in respect to intercept. For such problems, an exploratory method is developed to identify influential subgroups of a heterogeneous population. Discriminant analysis is used to characterize, interpret and validate subgroups. Four criteria are proposed to select a set of influential subgroups, which are then used in estimating a linear regression model. The method is illustrated through analysis of real data on political violence.     

Estimating the effects of higher coupon face values on the timing of redemptions,the mix of coupon redeemers,and purchase quantity

One of the key decisions a manager must make in designing a coupon promotion is to decide on the face value. In this study we examine the effects of higher face values on coupon redemption timing, category purchase timing, the mix of buyers who redeem the coupon, and purchase quantity. Data from a field experiment on coupon face values are used to test the hypotheses. A new method of measuring the effects of a coupon on category purchase timing is proposed. We find that coupons per se tend to advance category purchase timing, but higher face values do not increase the magnitude of this effect. Surprisingly, higher face values appear to increase redemption rates for both the prior nonbuyers and prior buyers of the brand in a similar way. However, higher face values have little effect on the package size purchased, the number of units purchased, or the total quantity (package size times units) purchased.