Abstract
This paper documents changes in volatility, returns, liquidity and valuation on the local market following different ADR issues, viz., Level I, II, III, Rule 144A and Regulation S offerings, by the Indian firms in the global market. The sample consists of 84 ADR and GDR issues made by the Indian firms during 1990–2001. The Rule 144A and Reg S issues experience a significant decline in volatility on the home (Indian) market and these effects are mainly observed during the first sub-period, i.e. 1990–1997. In addition, Level III ADRS, which are exchange listed and capital raising issues, experience a significant increase in liquidity on the home market and these occur in the second sub-period, i.e. 1998–2001. Though ADRs in general experience an increase in valuation (as measured by the q ratios) after the U.S. issue, there is no strong evidence to suggest that the magnitude of increase depends on the method of entry.
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