Skip to main content
    • Aa
    • Aa

The Long-Run Performance of Global Equity Offerings


We investigate the long-run return performance of non-U.S. firms that raise equity capital in U.S. markets. Overall, between 1982 and 1996, our sample of 333 global equity offerings with U.S. depositary receipt (ADR) tranches from 35 countries in Asia, Latin America, and Europe under-perform local market benchmarks of comparable firms by 8%–15% over the three years following issuance. We show that differences in long-run returns are related to the scope and magnitude of investment barriers that induce segmentation of capital markets around the world. While companies from markets with significant investment barriers for foreigners that issue equity on major U.S. exchanges outperform their benchmarks, those from segmented markets that issue equity in the U.S. by way of Rule 144A private placements significantly under-perform. We also show that inter-market competition for order flow in the post-issuance period affects long-run return performance. Post-issuance buy-and-hold abnormal returns are most significantly and positively related to the offering's ability to generate a larger share of U.S. trading volume.

Linked references
Hide All

This list contains references from the content that can be linked to their source. For a full set of references and notes please see the PDF or HTML where available.

A. Admati , and P. Pfleiderer . “A Theory of Intraday Patterns: Volume and Price Variability.” Review of Financial Studies, 1 (1988), 340.

G. Alexander ; C. Eun ; and S. Janakiramanan . “Asset Pricing and Dual Listing on Foreign Capital Markets: A Note.” Journal of Finance, 42 (1987), 151158.

G. Alexander ; C. Eun ; and S. Janakiramanan . “International Listings and Stock Returns: Some Empirical Evidence.” Journal of Financial and Quantitative Analysis, 23 (1988), 135151.

T. Andersen Return Volatility and Trading Volume: An Information Flow Interpretation of Stochastic Voliatility.” Journal of Finance, 51 (1996), 169203.

B. Barber , and J. Lyon . “Detecting Long Run Abnormal Stock Returns: The Empirical Power and Specification of Test Statistics.” Journal of Financial Economics, 41 (1996), 359399.

B. Barber , and J. Lyon . “Firm Size, Book-to-Market Ratio, and Security Returns: A Holdout Sample of Financial Firms.” Journal of Finance, 52 (1997), 845857.

B. Barber , and T. Odean . “Trading is Hazardous to Your Wealth: The Common Stock Investment Performance of Individual Investors.” Journal of Finance, 55 (2000), 773806.

G. Bekaert , and C. Harvey . “Foreign Speculators and Emerging Equity Markets.” Journal of Finance, 55 (2000), 565613.

A. Brav Infernce in Long-Horizon Event Studies: A Bayesian Approach with Application to Initial Public offerings.” Journal of Finance, 55 (2000), 19792016.

A. Brav , and P. Gompers . “Myth or Reality? The Long Run Under-Performance of Initial Public Offerings: Evidence from Venture and Non-Venture Capital Backed Companies.” Journal of Finance, 52 (1997), 17911821.

J. Cai , and K. C. J. Wei . “The Investment and Operating Performance of Japanese Initial Public Offerings.” Pacific Basin Finance Journal, 5 (1997), 389418.

B. Chowdhry , and V. Nanda . “Multi-Market Trading and Market Liquidity.” Review of Finance Studies, 4 (1991), 483512.

I. Domowitz ; J. Glen ; and A. Madhavan . “Market Segmentation and Stock Prices: Evidence from an Emerging Market.” Journal of Finance, 52 (1997), 10591085.

I. Domowitz ; J. Glen ; and A. Madhavan . “International Cross-Listing and Order Flow Migration: Evidence from an Emerging Market.” Journal of Finance, 53 (1998), 20262027.

E. Eckbo ; R. Masulis ; and O. Norli . “Seasoned Public Offerings: Resolution of the ‘New Issues Puzzle’” Journal of Financial Economics, 56 (2000), 251291.

V. Errunza , and E. Losq . “International Asset Pricing under Mild Segmentation: Theory and Test.” Journal of Finance, 40 (1985), 105124.

E. Fama Market Efficiency, Long-Term Returns and Behavioral Finance.” Journal of Financial Economics, 49 (1998), 283306.

S. Foerster , and G. A. Karolyi . “International Listings of Stocks: The Case of Canada and the U.S.Journal of International Business Studies, 24 (1993), 763784.

S. Foerster , and G. A. Karolyi . “Multi-Market Trading and Liquidity: A Transaction Data Analysis Canada-U.S. Inter-listings.” Journal of International Financial Markets, Institutions and Money, 8 (1998), 393412.

S. Foerster , and G. A. Karolyi . “The Effects of Market Segmentation and Investor Recognition on Asset Prices: Evidence from Foreign Stocks Listing in the U.S.Journal of Finance, 54 (1999), 9811014.

Y. Hamao ; F. Packer ; and J. Ritter . “Institutional Affiliation and the Role of Venture Capital: Evidence from Initial Public Offerings in Japan.” Pacific Basin Finance Journal, (forthcoming 2000).

P. Henry Stock Market Liberalization, Economic Reform and Emerging Market Equity Prices.” Journal of Finance, (2000), 529563.

M. Hertzel , and R. Smith . “Market Discounts and Shareholder Gains for Placing Equity Privately.” Journal of Finance, 48 (1993), 459485.

J. Kang , and R. Stulz . “How Different is Japanese Corporate Finance? An Investigation of New Security Issues.” Review of Financial Studies, 9 (1996), 109139.

J. Karpoff The Relation between Price Changes and Trading Volume: A Survey.” Journal of Financial and Quantitative Analysis, 22 (1987), 109126.

S. P. Kothari , and J. Warner . “Measuring Long-Horizon Security Price Performance.” Journal of Financial Economics, 43 (1997), 301340.

R. LaPorta ; J. Lopez-de-Silanes ; A. Shleifer ; and R. Vishny . “Law and Finance.” Journal of Political Economy, 106 (1998), 11131155.

M. Levis The Long-Run Performance of Initial Public Offerings: The UK Experience 1980–1988.” Financial Management, 22 (1993), 2841.

T. Loughran , and J. Ritter . “The New Issue Puzzle.” Journal of Finance, 50 (1995), 2351.

T. Loughran , and J. Ritter . “Uniformly Least Powerful Tests of Market Efficiency.” Journal of Financial Economics, 55 (2000), 361390.

T. Loughran ; J. Ritter ; and K. Rydqvist . “Initial Public Offerings: International Insights.” Pacific Basin Finance Journal, 2 (1994), 165199.

J. Lyon ; B. Barber ; and C. Tsai . “Improved Methods for Tests of Long-Run Abnormal Stock Returns.” Journal of Finance, 54 (1999), 165201.

W. Megginson ; R. Nash ; J. Netter ; and A. Schwartz . “The Long-Run Return to Invcestors in Share Issue Privatizations.” Financial Management, 29 (2000), 6777.

D. Miller The Market Reaction to International Cross-Listing: Evidence from Depositary Receipts.” Journal of Financial Economics, 51 (1999), 103123.

U. Mittoo Cross-Country Listing and Trading Volume: Evidence from the Toronto and Vancouver Stock Exchanges.” Journal of International Financial Management and Accounting, 8 (1997), 147174.

W. Newey , and K. West . “A Simple Positive Definite Heteroscedasticity and Autocorrelation Consistent Covariance Matrix.” Econometrica, 55 (1987), 703708.

T. Odean Do Investors Trade Too Much?American Economic Review, 89 (1999), 12791298.

M. Pagano Trading Volume and Asset Liquidity.” Quarterly Journal of Economics, 104 (1989), 255274.

J. Ritter The Long-Run Performance of Initial Public Offerings.” Journal of Finance, 46 (1991), 327.

D. Spiess , and J. Affleck-Graves . “Under-Performance in Long-Run Stock Returns following Seasoned Equity Offerings.” Journal of Financial Economics, 38 (1995), 243267.

R. Stapleton , and M. Subrahmanyam . “Market Imperfections, Capital Market Equilibrium and Corporate Finance.” Journal of Finance, 32 (1977), 307319.

R. Stulz , and W. Wasserfallen . “Foreign Equity Investment Restrictions, Capital Flight, and Share-holder Wealth Maximization: Theory and Evidence.” Review of Financial Studies, 8 (1995), 10191057.

K. Wruck Equity Ownership Concentration and Firm Value: Evidence from Private Equity Placements.” Journal of Financial Economics, 23 (1989), 327.

Recommend this journal

Email your librarian or administrator to recommend adding this journal to your organisation's collection.

Journal of Financial and Quantitative Analysis
  • ISSN: 0022-1090
  • EISSN: 1756-6916
  • URL: /core/journals/journal-of-financial-and-quantitative-analysis
Please enter your name
Please enter a valid email address
Who would you like to send this to? *


Altmetric attention score

Full text views

Total number of HTML views: 0
Total number of PDF views: 23 *
Loading metrics...

Abstract views

Total abstract views: 128 *
Loading metrics...

* Views captured on Cambridge Core between September 2016 - 23rd June 2017. This data will be updated every 24 hours.