The Effects of Market Segmentation and Illiquidity on Asset Prices: Evidence from Foreign Stocks Listing in the Us
Dice Center for Research in Financial Economics WPS 96-6
53 Pages Posted: 27 Nov 1996
Date Written: August 1998
new abstract and new pdf file Diane 10/22/98 Diane
Non-U.S. firms cross-listing shares on U.S. exchanges as American Depositary Receipts earn cumulative abnormal returns of 19 percent during the year before listing, an additional 1.20 percent during the listing week, but incur a loss of 14 percent during the year following listing. We show how these unusual share price changes are robust to changing market risk exposures and are related to an expansion of the shareholder base and to the amount of capital raised at the time of listing. Our tests provide support for the market segmentation hypothesis and Merton?s (1987) investor recognition hypothesis.
JEL Classification: G12
Suggested Citation: Suggested Citation