Essays in international corporate finance and investment banking.

摘要

My dissertation consists of three essays. The first two essays deal with American Depositary Receipts (ADRs) and fall into International Corporate Finance category, and the third essay falls into Investment Banking category.While there is evidence on the listing effects of new ADRs on the underlying home stock prices, little is known about the effect on other ADRs from the same country. In my second essay, based on the above data set, I find that listings of new ADRs from emerging markets are associated with a decline in prices of other ADRs from the same country. This result is consistent with a Diversification with Wealth Constraints hypothesis, i.e., investors shift wealth from other ADRs to new ADRs from the same country to diversify their portfolios.My third essay (coauthored with Manju Puri, Anthony Saunders and Ingo Walter) examines debt securities underwritten by Section 20 subsidiaries of bank holding companies relative to those underwritten by investment houses. Consistent with a net certification effect for banks, bank underwriting of lower credit rated firms to whom the bank lends results in relatively higher prices. We find no evidence of conflicts of interest even when an issue is used to repay bank debt. Contrary to the contention that universal banking stunts availability of finance to small firms, bank underwritings appear to benefit small firms by bringing a relatively larger proportion of small issues to the market.In the last five years, significant amounts of international capital were raised through ADRs by foreign firms, many of which were first-time issuers from emerging markets. In my first essay, I model the information asymmetries about first-time ADR issuers both in the ADR market and in the home market of the issuers. Investors in the ADR market learn about the evolution of a country characteristic through sequential issues of ADRs from the same country. The commitment to adhere to the stringent SEC disclosure requirements for ADR issuers conveys favorable information about the issuing firm to investors in the home market. I derive testable implications for the underpricing of ADR issues, its dynamics over time and the announcement effects associated with first-time ADR issues on the underlying stock in the home market. My main empirical results are based on an extensive data set of ADRs listed on NYSE, AMEX and NASDAQ between 1991 and 1995. I find that first-time ADR issues from emerging markets are underpriced relative to the after-market traded price, and that later ADR issues from a country are less underpriced relative to earlier issues from the same country. Further, such ADR issues elicit a positive announcement effect on the underlying stock prices in the home market. In addition, these issues are typically offered at a discount relative to the underlying home stock prices. Overall, the empirical results are consistent with the implications of the theoretical framework developed in this essay.