عملکرد طولانی مدت مربوط به مسائل خصوصی سازی ADR (دریافت سپرده گذاری آمریکایی)

American depository receipts (ADRs) have been increasingly used in the share issue privatization process (SIP) by privatizing governments, both in developed and developing countries. In this study, long-term performance of 143 privatization-related ADR programs were analyzed. The ADR programs covered in the study were initiated between 1984 and 1999 and included a diverse mix of companies from 29 different industries across 31 developed and emerging markets. The analysis of the long-run performance of these programs revealed interesting patterns. In all cases, average cumulative returns and average cumulative abnormal returns of developed country privatization-related ADRs exceeded emerging market privatization returns. The same conclusion was reached using an alternative return calculation methodology. While sample companies generally outperformed their respective country indices and the FT World Index, they under performed the S&P 500 Index. In addition, findings indicate that Level I issues traded in over-the-counter (OTC) markets outperform the Level II and Level III ADRs traded in the NYSE, as well as 144A private placements.

Privatizations through share issues accounted for approximately 70% of the privatization revenues generated by governments in the last two decades. These issues collectively represent a significant portion of the global equity supply. In 2000, share issue privatizations accounted for $90bn of the $200bn global initial public offerings (IPOs) (Hill, 2002). Although share issue privatizations (SIPs) proved to be an effective method in divestment of large state-owned enterprises (SOEs), their use was constrained by the size and sophistication of the local equity markets. Domestic absorption of multi-billion-dollar issues stumbled upon serious obstacles, even in relatively developed equity markets.1 The limitations imposed by the size of individual transactions and the equity market infrastructures forced government issuers to search for cross-border venues for the sale of SOE shares.2 The globalization of financial markets enabled governments to sell equity in foreign markets through cross-listings and private placements, and international offerings reached approximately 47% of total share-issue privatizations (Bortolotti et al., 2000 and Megginson et al., 2000). Among competing financial centers, the government issuers were particularly attracted to US equity markets due to its sophisticated market infrastructure and the availability of a diverse institutional and individual investor pool. The center of gravity further shifted toward US equity markets when the introduction of a new regulatory framework by the US Securities and Exchange Commission (SEC) energized the American Depository Receipt (ADR) market in 1985. The ADRs denote shares that represent equity issued in a foreign country. These negotiable certificates, which represent a non-US company's publicly traded equity, are quoted, traded and pay dividends in accordance with US clearing and settlement standards. As the new regulatory regime relaxed stringent disclosure requirements and offered flexibility, a range of ADR tools emerged. The variations of generic ADRs facilitated access to US equity markets for a large number of non-US companies, including the state-owned enterprises. These ADR tools proved to be particularly attractive and effective for privatization agencies in search of cross-border placement opportunities. Consequently, ADRs were increasingly used in privatization-related equity issues. The increasing internationalization of privatization-related share issues, and particularly the use of ADRs by both developed and emerging market governments, produces at least two readily observable outcomes. First, privatization-related ADR issues create new investment opportunities for institutional and individual investors around the globe. Secondly, they facilitate internationalization of the cost of capital for the newly privatized firms. An immediately relevant inquiry motivated by these outcomes is the long-term performance of the privatization-related ADR issues. An examination of the observed price performance of privatization-related ADRs provides evidence about how the market expectations toward these privatization issues change.3 This has important implications for investors, since the existence of abnormal returns may lead to the formulation of trading strategies. The mirror image of the investors’ expected returns is the issuer's cost of external equity. Therefore, long-term returns also offer clues about the evolution of the cost of equity of the privatized firms over time. The performance of the UK and continental European share-issue privatizations was addressed in a series of studies in the early and mid-1990s. More recently, research focusing on cross-country samples reported long-term abnormal returns.4 However, studies investigating the performance of international share-issue privatizations are rare. In a recent study, Foerster and Karolyi (2000) analyzed the long-term performance of 333 global equity offerings from 35 countries. The Foerster–Karolyi sample included 68 privatization-related ADR issues. They reported statistically significant long-term underperformance for all global equity offerings, including the privatization-related ADRs. These results contradict the positive abnormal returns reported in earlier privatization share-issue performance studies. The current study was partially motivated by the conflicting performance results reported in the recent literature, and examines the long-term performance of 143 privatization-related ADR issues from 31 countries. While the study is primarily focused on the long-term return performance, two sets of relationships were also addressed: (1) the relationship between the after-market performance and the origin of the issuer; and (2) the relationship between the after-market performance and the trading platform. The issuers were classified as developed or emerging market in origin. Unraveling the country of origin–performance relationship is particularly appealing to portfolio managers from the perspective of portfolio diversification. Likewise, the relationship between the type of ADR and the trading platform where ADRs are listed and traded and the after market performance is of interest to privatization advisors and policy makers in privatizing countries.

In this study, long-term performances of privatization-related ADR issues were examined. The sample included 36 ADR programs from developed countries and 107 programs from emerging markets. These ADR programs covered in the sample were initiated between 1984 and 1999; however, only five of the 143 programs analyzed became effective before 1991. The sample included a diverse mix of companies from 29 different industries across 31 countries. Analysis of the long-run performance of these programs revealed interesting patterns. In all cases, average cumulative returns and average cumulative abnormal returns (returns adjusted for selected benchmarks) of developed-country privatizations exceeded emerging-market privatization returns. The same conclusion was reached using an alternative return calculation methodology—buy-and-hold returns. However, the performance differences were found to be statistically non-significant. While sample companies generally outperformed their respective country index and the FT World Index, they underperformed the S&P 500. With few exceptions, 36-month cumulative abnormal returns suffered from statistical non-significance. The negative CARs observed when the S&P 500 benchmark was used could be attributed to the superb performance of the US equity market during the 1990s, which overlapped with the performance measurements of 96.5% of the sample companies. Relatively poor performance of emerging market issues is paradoxical. In theory, we expect two sets of factors to boost the return performance of emerging market companies issuing ADRs in the privatization process. First, privatization is expected to improve operating performance, as the privatized companies are freed from political intervention and capitalize on the incentives to increase efficiency. The empirical evidence reviewed in Section 3 suggests that, on average, operating performance increases in the post-privatization period. Second, equity issues in more advanced equity markets by companies originating from segmented markets are expected to lead to a rather dramatic decline in the cost of capital as compared to companies originating from more-integrated developed countries. The asset pricing theories and the empirical literature reviewed in Section 3 predict that emerging-market companies benefiting from a decline in the cost of capital should yield higher long-term returns as compared to developed-country companies. A possible explanation for the underperformance of privatization-related ADR issues originating from emerging markets may be associated with the privatization process itself and the status of the privatized companies during the sample period. The companies in the sample are at different stages of the privatization process, and in some cases residual government share is still significant. It is plausible that lingering government involvement and failure in the smooth execution of privatization may increase perceived risks associated with the company in the privatization stage and the country of origin. This may well result in a sharp increase in the risk premiums and undermine the company performance in the post-issue period. This is more likely to happen in emerging-market than developed-country settings. The second explanation for the underperformance of emerging market issues comes from the asset-pricing angle. Although companies from markets with more stringent direct or indirect investment barriers are expected to benefit more from an ADR issue, the type of ADR program and the post-issue compliance of the issuer with more demanding disclosure and corporate governance standards should finally determine the extent to which the expected benefits are realized. Unless the initially significant informational asymmetry is reduced through certification and continued signaling of the company's commitment to the new rules, the expected decline in the cost of capital may not materialize. A brief review of Table 1 reveals that 55 of the 107 ADR programs initiated by emerging market companies are 144A or Level I ADR programs. This suggests that more than half of the sample firms suffer from the lack of a strong certification effect discussed in Section 3. In addition, the disclosure and reporting standards stipulated for 144A and Level I ADR programs are minimal. Therefore, it is plausible to argue that informational asymmetry for US investors has not been successfully resolved for a large number of privatized companies, and the perceived risk for US investors has not been adjusted downwards in the period following the ADR issue. In relative terms, developed-country companies may suffer less from such informational asymmetry, and they be subject to less severe discounting by US investors. Analysis of the different types of ADR programs and the trading systems used by the privatizing governments revealed a rather surprising pattern. Level I issues traded in the OTC market performed significantly better than Level II and Level III programs, as well as 144A private placements. As was briefly discussed above, international public offering and cross-listing literature suggests that signals sent by Level II and Level III programs should lead to a sharper decline in the cost of capital of the issuers, due to an expected increase in transparency and more effective shareholder monitoring as compared to Level I and 144A programs. In addition to a stronger certification effect, ADRs traded in the NYSE should benefit from a more liquid market. Investors are expected demand a lower liquidity risk premium from an exchange-traded ADR as compared to an ADR traded in the OTC market. While the underperformance of the 144A programs are predicted, the higher long-run returns observed in ADR programs traded in OTC is difficult to explain. Although 22 of the 34 OTC-traded ADR programs included in the sample are from emerging market origin, relatively poor performance of emerging-market ADRs observed in the sample do not dominate this group. There are a few possible explanations for this rather novel empirical finding. First, it is possible that ADR depositories, such as JP Morgan-Chase and Bank of New York, support the sustained liquidity in the OTC market by actively promoting ADR trading. Since Level I ADRs make up a growing component of the market, depositories have a vested interest in maintenance of a liquid market. This may reduce the liquidity premium demanded by the investors. Whether such efforts can provide a more liquid market than an organized exchange needs to be explored by comparing the liquidity premiums for a larger group of ADRs. Second, the performance difference can be attributed to a fundamental difference between Level I and Level III ADR programs. Level III programs are capital-raising issues, as are 144A programs. On the other hand, Level I programs do not allow raising of capital. If governments attempt to time the market (as do their private counterparts), when investors are willing to pay more than the fair value of their companies’ shares, post-privatization performance may suffer. Finally, these performance differences may arise due to risk characteristics of the sample companies. It is possible that privatizing governments seeking certification through Level II and Level III issues and an exchange listing for their inherently risky companies may be attempting to mitigate larger risk premiums, which otherwise would be demanded by investors. The sample size, the simplicity of the methodology employed and the generally statistically non-significant results reported in this analysis do not allow us to make far-reaching generalizations of the study results. In particular, inherent negative bias imposed by the use of portfolio balancing methodology calls for caution in interpretation of the results. However, findings of the study motivate further investigation of the patterns identified using alternative methodologies and considering a wider range of variables that would help to describe the context of the privatization for each company. The performance differences reported between developed and emerging market issues warrant further investigation using a larger sample of ADRs. In addition, the performance differences observed between OTC-traded ADRs and the ADRs traded in the NYSE exchange can be further examined using a larger sample of ADRs.