Foreign Firms Issuing Equity on Us Exchanges: An Empirical Investigation of Ipos and Seos

25 Pages Posted: 29 Sep 2003

See all articles by Padma Kadiyala

Padma Kadiyala

Pace University - Lubin School of Business

Avanidhar Subrahmanyam

University of California, Los Angeles (UCLA) - Finance Area; Institute of Global Finance, UNSW Business School; Financial Research Network (FIRN)

Abstract

We analyse a sample of foreign firms issuing equity in the USA to determine the factors that affect IPO and SEO pricing. The average SEO discount, defined as the percentage difference between the price in the local market on the offering date and the SEO offer price, is 2.07%, and is significantly lower for stocks that are ultimately listed on the NYSE/AMEX than for stocks that are listed on the Nasdaq. Foreign equity issues are under-priced; the traditional under-pricing discount, which is defined as the percentage difference between the closing price on the first day of trading and the offer price, is 18.75% on average. Equity issuers from industry groups with the largest six-month pre-IPO return in the US market experience a higher level of under-pricing. For the sub-sample of emerging market issues, we document that, in the after-market, the ADR price remains persistently above the dollar denominated price in the domestic market for up to 90 days following the date of the issue.

Suggested Citation

Kadiyala, Padma and Subrahmanyam, Avanidhar, Foreign Firms Issuing Equity on Us Exchanges: An Empirical Investigation of Ipos and Seos. International Review of Finance, Vol. 3, pp. 27-51, March 2002. Available at SSRN: https://ssrn.com/abstract=416541

Padma Kadiyala (Contact Author)

Pace University - Lubin School of Business ( email )

1 Pace Plaza
New York, NY 10038-1502
United States
914-773-3620 (Phone)

Avanidhar Subrahmanyam

University of California, Los Angeles (UCLA) - Finance Area ( email )

Los Angeles, CA 90095-1481
United States
310-825-5355 (Phone)
310-206-5455 (Fax)

Institute of Global Finance, UNSW Business School

Sydney, NSW 2052
Australia

Financial Research Network (FIRN)

C/- University of Queensland Business School
St Lucia, 4071 Brisbane
Queensland
Australia

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