Abstract
This study investigates the long-run equity return performance of non-U.S. firms that raise capital in U.S. markets. Unlike domestic capital raising studies by Ritter (1991), Speiss & Affleck-Graves (1995) and Loughran & Ritter (1995) which uncover a long-run underperformance for initial public (IPO) and seasoned equity offerings (SEO) of 18 to 26 percent over three years, our study of global offerings finds three-year cumulative abnormal returns overall are only -1.7 percent. We also find that capital raising with public, exchange-listed ADR programs yields higher cumulative abnormal returns than Rule 144A private placements available only to qualified institutional buyers (QIBs). We examine a number of factors and uncover significant regional differences and inferior returns performance by emerging market ADR programs and by SEO DR offerings. While performance is also related to firm size, book-to-market ratios and the amount of capital raised and the total trading volume in home and U.S. markets, our cross-sectional tests show that the post-issuance abnormal return performance is most significantly positively related to the ability of the firm to capture a greater share of U.S. trading volume.
Talk to us
Join us for a 30 min session where you can share your feedback and ask us any queries you have
Disclaimer: All third-party content on this website/platform is and will remain the property of their respective owners and is provided on "as is" basis without any warranties, express or implied. Use of third-party content does not indicate any affiliation, sponsorship with or endorsement by them. Any references to third-party content is to identify the corresponding services and shall be considered fair use under The CopyrightLaw.