Empirical Analysis of Total Factor Productivity Growth Trend in Agriculture, Financial & Business Intermediaries and Electricity, Gas and Water Sectors: A Malmquist Index Approach and Stepwise Regression (Analysis) of 20 SSA Countries, 2001-2011

(ProQuest: ... denotes formulae omitted.)INTRODUCTIONAmerican Depositary Receipts (ADRs) are securities traded in the United States that represent ownership in a foreign company. For U.S. investors, ADRs provide convenience in international investment because they offer familiar trade, clearance and settlement procedures. Perhaps more importantly, an ADR investment offers U.S. investors international diversification benefits. Furthermore, ADRs benefit their respective issuers because they offer an expanded shareholder base, higher liquidity, higher global visibility, and a lower cost of capital (Karolyi, 1998; 2006).When cross-listing, firms choose what type of ADR to issue: Level I, Level II, Level III, or private placements. 1 Level I ADRs are traded in over-the-counter exchanges. Private placements of ADRs to institutional investors can be issued under Rule144A in which shares are placed amongst qualified institutional buyers (QIBs). Neither requires registration with the Securities and Exchange Commission (SEC). Of interest to this study are ADR issues of Levels II and III because these issues are traded on the New York Stock Exchange (NYSE) and NASDAQ. Consequently, issuers are obligated to meet SEC disclosure requirements and conform to U.S. Generally Accepted Accounting Principles (GAAP) which enhances the legal protection of the firm's investors and thus increases the value of the firm (Coffee, 2002; Doidge, Karolyi, & Stulz, 2004). While both are listed on exchanges, ADRs of Levels II and III differ significantly in purpose. Level II ADRs are issued with the intent to meet U.S. investor demand for foreign equity while Level III ADRs are issued with the intent to raise capital in the U.S. market.Boubakri, Cosset and Samet (2010) document that the choice between Level II and III ADRs is influenced by several characteristics including the issuing firm's country of origin. Their analysis of country level characteristics focuses primarily on investor protection and the quality of accounting standards. We aim to contribute to the existing literature by asking: Does the domestic macroeconomic environment influence a firm's choice between Level II and Level III ADRs?To examine this question, we apply probit and tobit models to a panel dataset consisting of 20 countries which span 368 exchange listed ADR issues during 1996-2010. Our results suggest that macroeconomic characteristics of the home country do affect firms' choice of crosslisting mechanism in the host country. Specifically firms from countries with stable macroeconomic environments and greater credit available to the private sector are more likely to issue Level II ADRs. Firms in these countries are less likely to be credit constrained in the domestic market and seek primarily to increase their shareholder base with ADR issuance. Our results also indicate that improvements in the home market's regulatory quality and higher liquidity in the domestic stock market are consistent with issuance of Level III ADRs. This is consistent with evidence in Claessens and Schmukler (2006) who argue that countries with better developed stock markets have greater internationalization and more capital raising issues abroad.MEASURES EMPLOYEDCharacteristics of the Country of OriginAs reviewed by Dodd (2013), a vast amount of literature examines why firms internationalize, but little attention has been paid to how firms internationalize. A notable exception is Boubakri et al. (2010) which documents that large firms, firms with high pre-tax income, firms with high growth opportunities, and privatized firms tend to issue more Level III ADRs. However, they examine little in terms of the country characteristics that impact the ADR choice; they find that the regulatory environment as firms from weak investor protection environments tend to issue more Level III ADRs.We focus on the macroeconomic environment because more developed countries typically have more developed financial markets (Demirguc-Kunt & Levine, 1996) and countries with better economic fundamentals have more firms that internationalize and that raise capital internationally (Claessens, Klingebiel & Schmukler, 2006; Claessens & Schmukler, 2007). …