International Listing and Stock Returns: Evidence from Emerging Economies

Abstract

The paper examines the impact of American Depositary Receipt (ADR) listings on the return of underlying domestic stocks of six emerging markets from Asia and Latin America and they are India, Korea, Hong Kong, Brazil, Argentina and Mexico. Average abnormal returns and cumulative average abnormal returns are calculated for the [–100, +100] event window, with the ADR listing date being the event date. The results indicated a significant positive abnormal local market returns on an ADR listing day. However the overall sample seems to be adversely affected by the international listing during the post-listing period. The study also compared the long-term performance of domestic and international market returns of the underlying shares and found insignificant difference between the returns of two markets and the market segmentation hypothesis holds good in all the stocks of six countries and it occurs due to the differences in the prices of ADRs and underlying domestic shares so ADRs are trading at premium. Keywords: Emerging Markets, American Depositary Receipt, International Listings, ADR Premium

View PDF