In this paper, we show how the bilateral political relationship (political proximity) between US and other countries affect the sentiment of US media towards firms with American Depositary Receipts (ADR). We distingish news into negative and positive news by using RavenPack’s sentiment score - Event Sentiment Score (ESS). With ESS, we count annual number of positive and negative news for each ADR firms and study the impact of political proximity on the sentiment of news by matching list of 2,579 ADR firms to Raven-Pack. We find that ADR firms from countries that have bad political relationship with US during the year receive relatively more negative news than positive news in that year and this has negative impact on stock performances. We also find that the negative impact of bad bilateral relationship on news sentiment is stronger for ADR firms with more exposure to US media. We conclude our paper by showing that bad bilateral relationship leads to higher likeliness of ADR firms to terminate their ADRs.
JELClassification: G00, G30, H77
Keywords: Political Proximity; News Sentiment; American Depositary Receipts (ADR); Termination of ADR
