Cross-Listing and the Long-Term Performance of ADRs: Revisiting European Evidence

Abstract

In this paper, we examine several cross-listing theories employing a sample of over 250 European ADRs representing 19 countries during the 1970-2002 period. We find that, first, though both Level II and III listings underperform over the three years subsequent to the US listing, the determinants of long-term performance are significantly different for the non-IPO and IPO firms. Second, there is a strong support for investor recognition in the non-IPO sample, for window-of-opportunity in the IPO sample, and for bonding in both samples, but little support for the market segmentation hypothesis. Overall, our results support the notion that different cross-listing theories are complementary and not mutually exclusive, in explaining the long-term performance.

Keywords: Stock performance, Long-run performance, US listings, European ADRs, Capital raising ADRs, Initial Public offerings

JEL Classification: F30, G15, G30