Market Segmentation and the Cost of Capital in International Equity Markets

36 Pages Posted: 13 Aug 1998

See all articles by Vihang R. Errunza

Vihang R. Errunza

McGill University - Desautels Faculty of Management

Darius P. Miller

Southern Methodist University (SMU) - Finance Department

Multiple version iconThere are 2 versions of this paper

Date Written: January 2000

Abstract

While theoretical models predict a decrease in the cost of capital from depositary receipt offerings, the economic benefits of this liberalization have been difficult to quantify. Using a sample of 126 firms from 32 countries, we document a significant decline of 42% in the cost of capital. In addition, we show the decline is driven by the ability of U.S. investors to span the foreign security prior to cross-listing. Our findings support the hypothesis that financial market liberalizations have significant economic benefits.

JEL Classification: G15

Suggested Citation

Errunza, Vihang R. and Miller, Darius P., Market Segmentation and the Cost of Capital in International Equity Markets (January 2000). Available at SSRN: https://ssrn.com/abstract=99833 or http://dx.doi.org/10.2139/ssrn.99833

Vihang R. Errunza

McGill University - Desautels Faculty of Management ( email )

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Canada
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514-398-3876 (Fax)

Darius P. Miller (Contact Author)

Southern Methodist University (SMU) - Finance Department ( email )

United States

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