We investigate the long-run return performance ofnon-U.S. firms that raise equity capital in U.S.markets. Overall, between 1982 and 1996, our sampleof 333 global equity offerings with U.S. depositaryreceipt (ADR) tranches from 35 countries in Asia,Latin America, and Europe under-perform local marketbenchmarks of comparable firms by 8%–15% over thethree years following issuance. We show thatdifferences in long-run returns are related to thescope and magnitude of investment barriers thatinduce segmentation of capital markets around theworld. While companies from markets with significantinvestment barriers for foreigners that issue equityon major U.S. exchanges outperform their benchmarks,those from segmented markets that issue equity inthe U.S. by way of Rule 144A private placementssignificantly under-perform. We also show thatinter-market competition for order flow in thepost-issuance period affects long-run returnperformance. Post-issuance buy-and-hold abnormalreturns are most significantly and positivelyrelated to the offering's ability to generate alarger share of U.S. trading volume.
