Return Performance and Liquidity of Cross-Listed Central European Stocks

Abstract

This paper provides an empirical investigation of cross-listing's implications for companies and stock exchanges in the newly-established capital markets in Central Europe. We find that companies experience a permanent value enhancement, and cumulative abnormal returns reach a strongly significant level of 25% around Depository Receipts offering. The results show that cross-listing is an efficient tool of raising capital when the local market is underdeveloped. We observe that stock liquidity improves after international listing what indicates that foreign trading venues attract new investors and do not deteriorate local capital markets' quality. Average turnover ratio in the domestic market increases significantly by 34%.

Keywords: international cross-listing, Central European stocks, Depository Receipts

JEL Classification: G14, G15, G20