Cum-Fake Trading Using ADRs from European Countries : An event study of all European ADRs

In this thesis, we investigate the use of European ADRs in cum-fake schemes. We look at the daily trading volume for all ADRs for European companies in the longest possible time span for each company, with the longest being 1984 to 2022. Cum-fake, cum-cum and cum-ex schemes have collectively resulted in huge funds being heisted from European governments and tax authorities in recent years. The cum-fake scheme involves exploiting pre-released ADRs to receive a tax refund on withholding tax that has never been paid. Our analysis is divided into two parts. First, we look at the daily trading volume around the ex-dividend date on a country-by-country basis, with the purpose of finding which European countries have been affected by cum-fake trading. Secondly, we take these countries and use the daily deviation from the yearly average of each company to find the years for each country that show clear signs of cum-fake trading. We find that there are several countries that show significant relations between the trading volume and the ex-dividend date. However, the estimated abnormal volume is lower than expected. In the yearly analysis, we find that the 1990s seems to be the most prevalent period for cum-fake trading.