We show that cross-listed (A & R) Mexican firms, on average, are smaller, more highly levered, and less profitable than non-cross-listed (NCL) firms.  Further, logistic regression models for classifying various ADR and NCL groupings of firms, using financial variables and other firm characteristics, are highly significant.  While supplemental tests of earnings quality suggest that NCL firms exhibit nominally smoother earnings, that evidence is not sufficient to explain the stronger financial performance reported for those firms relative to ADR firms.  Finally, our tests of value relevance, using book value and earnings to explain price, show significantly higher explanatory power for the ADR firms and generally non-significant explanatory power for the NCL firms.  The value-relevance results may indicate that investors in Mexican ADR firms benefit from U.S. regulation and that reported market inefficiency in Mexico may result in low demand for financial statements of NCL firms. 

This study has the advantage of focusing on a single, emerging-market economy (Mexico, the United State’s second-largest trade partner) in contrast to most previous ADR research that uses multi-country samples dominated by developed-market countries.  It is also one of the first ADR studies to deal with selection-bias issues by comparing ADR and NCL firms.  To gain these advantages, however, we must conduct tests on and draw conclusions from a relatively small sample.

An Empirical Investigation of Trends in Barter Activity in the Russian Federation
by Gary Fleischman, Paul Herz

Key words: barter, Russia, financial transparency, tax evasion

Abstract:  Barter, which has dominated the Russian economic landscape for years, has significant economic and accounting implications. Barter often camouflages Russian businesses’ financial and tax statements making true costs, prices, values, and profits a mystery, thereby compromising financial-statement transparency. Contemporary literature suggests that barter is still rampant in Russia.

For this study a group of Russian businesspersons were asked to complete a survey regarding the levels of barter in Russia since 1996.  The empirical evidence we collected provides insight into recent trends in barter in Russia, including indication that the incidence of barter has dramatically decreased. These findings have significant implications for Russian business and economic development. A reduction in barter is likely to enhance financial-statement transparency, thus minimizing information risk for potential investors and creditors.

Ownership structure, contingent-fit, and business-unit performance: A research model and empirical evidence
by Johnny Jermias, Lindawati Gani

Keywords:  Ownership structure; Strategic orientation; Contingency theory; Business-unit performance

Abstract:  This study investigates the influence of contingent-fit on the relationship between ownership structure and business-unit performance.  We predict that contingent-fit between strategy and its contextual variables will have a positive relationship with business-unit performance.  We also predict that widely-held companies will perform better than their closely-held counterparts but that the magnitude of the performance differential will decrease with the increasing level of contingent-fit.

Overall, the results are consistent with our predictions.  We found that contingent-fit is positively related to business-unit performance and widely-held business-units perform better than their closely-held counterparts.  The performance advantage, however, was mitigated by the level of contingent-fit.