Business Publications

Title

The Effects of Market Segmentation and Investor Recognition on Asset Prices: Evidence from Foreign Stocks Listing in the U.S.

Document Type

Article

Publication Date

12-2002

Volume

54

Issue

3

Journal

Journal of Finance

First Page

981

URL with Digital Object Identifier

https://doi.org/10.1111/0022-1082.00134

Last Page

1013

Abstract

Non-U.S. firms cross-listing shares on U.S. exchanges as American Depositary Receipts earn cumulative abnormal returns of 19 percent during the year before listing, an additional 1.20 percent during the listing week, but incur a loss of 14 percent during the year following listing. We show how these unusual share price changes are robust to changing market risk exposures and are related to an expansion of the shareholder base and to the amount of capital raised at the time of listing. Our tests provide support for the market segmentation hypothesis and Merton’s (1987) investor recognition hypothesis

Notes

This is the author-accepted version of an article published in the Journal of Finance. The final published article can be found at https://doi.org/10.1111/0022-1082.00134

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