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The market reaction to banks' overseas listing: Evidence from American depositary receipts

AL-Nasser, Abdallah Abed, Abdallah, Wissam and Yu, Zhu 2009. The market reaction to banks' overseas listing: Evidence from American depositary receipts. Journal of Financial Decision-Making 5 (2) , pp. 69-82.

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Abstract

This paper investigates the market reaction to banks' overseas listing, employing a sample of 68 foreign banks from 30 countries, which have cross-listed in the US between 1983 and 2006. We find that cross-listed banks experience market revaluation when they cross-list on the US market via ADR issuance. The average abnormal return declines by 0.05% during the listing period, and by 0.03% throughout the post-listing period. The negative post-listing abnormal return is robust after controlling for the change in risk exposure over time. Our results show a decrease in the local market beta following the ADR issuance while the foreign market beta remains unchanged. We find that banks with state ownership and banks from emerging markets have higher abnormal returns during the ADR listing period. The study suggests that market segmentation can no longer explain the valuation effect of the overseas listing given the trend of globalization of financial markets. Instead, the effect of the overseas listing depends on banks' specific characteristics and country of origin.

Item Type: Article
Date Type: Publication
Status: Published
Schools: Business (Including Economics)
Subjects: H Social Sciences > HG Finance
Uncontrolled Keywords: Expected return, cross-listed banks, state-owned banks, market origin
Last Modified: 04 Jun 2017 04:59
URI: http://orca.cf.ac.uk/id/eprint/47082

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