Foreign Firms in the Less-regulated US Market

The effects of trading Level I ADRs in the US OTC market were investigated for 119 firms from Hong Kong, the United Kingdom (UK), Australia, Japan, South Africa, Germany and Brazil during the period February 1992 to April 2001. Even though US GAAP accounting and disclosure requirements are not met, trading Level I ADRs in the less-regulated OTC market has benefits for some firms: surprisingly, we found that after commencement of a Level I ADR program 25% of sample firms showed at least one favourable change in accounting variables and market measures.