Launching an ADR programme still makes sense for non-US corporates in spite of the additional reporting burden imposed as a result of Sarbanes-Oxley, according to new research.
Analysis from Oxford Metrica, the UK-based strategic advisor, shows that American depository receipts continue to boost domestic share price despite the harsher regulatory environment.
The research reveals that launching a depositary receipt (DR) - a US security representing a non-US company's publicly traded equity - can increase domestic share price by up to 10% in one year. Regulatory changes in the US also mean investors are giving greater credence to non-US companies willing to abide by US regulatory practices. While the launch of an OTC depositary receipt in the US - exempt from complying with US GAAP - can increase domestic share price by just under 10%, a listed depository receipt increases this figure to over 10%.
The greater accountability of a level two-to-three listing, according to Deborah Pretty, principal at Oxford Metrica, means US investors have greater confidence in non-US companies willing to submit to US regulations: "Initially some companies may be fearful of the additional disclosure, but that's precisely the source of value.