International Cross-Listing, Market Quality, and Ownership Rights: An Analysis of the Mexican Stock Market

Posted: 2 Sep 1999

See all articles by Jack D. Glen

Jack D. Glen

International Finance Corporation (IFC)

Ian Domowitz

ITG, Inc.; National Bureau of Economic Research (NBER)

Ananth Madhavan

BlackRock, Inc.

Date Written: June 1994

Abstract

This paper examines empirically the impact of ADR listing in the United States on the Mexican Stock Exchange. The Mexican Stock Exchange is of particular interest because it is an emerging market that faces competition from highly liquid U.S. ADR markets during exchange hours. In addition, equity issues in Mexico are differentiated by ownership and voting rights. We develop an econometric model to assess the impact of ADR listing on various measures of market quality. The impact of international listing is complex. For shares open to foreign ownership, ADR introduction is associated with higher volatility and lower liquidity, consistent with market fragmentation. However, the bid-ask spreads of such shares decrease after ADR introduction, possibly because of increased competition among domestic liquidity providers to retain order flow. Consistent with this hypothesis, the changes in liquidity and spreads are small and unsystematic for non-voting stock and for issues where ownership was restricted to domestic residents prior to the ADR listing.

JEL Classification: G1, G15

Suggested Citation

Glen, Jack Dean and Domowitz, Ian H. and Madhavan, Ananth, International Cross-Listing, Market Quality, and Ownership Rights: An Analysis of the Mexican Stock Market (June 1994). Available at SSRN: https://ssrn.com/abstract=5506

Jack Dean Glen

International Finance Corporation (IFC) ( email )

2121 Pennsylvania Avenue, NW
Washington, DC 20433
United States
202-473-8641 (Phone)

Ian H. Domowitz

ITG, Inc. ( email )

380 Madison Avenue, 4th Floor
Electronic Market Initiatives
New York, NY 10017
United States

National Bureau of Economic Research (NBER)

1050 Massachusetts Avenue
Cambridge, MA 02138
United States

Ananth Madhavan (Contact Author)

BlackRock, Inc. ( email )

400 Howard Street
San Francisco, CA 94105
United States

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