The Long-Run Performance of Global Equity Offerings

Dice Working Paper No. 99-4

45 Pages Posted: 5 Oct 1999

See all articles by Stephen R. Foerster

Stephen R. Foerster

University of Western Ontario - Richard Ivey School of Business

George Andrew Karolyi

Cornell University - SC Johnson College of Business

Multiple version iconThere are 3 versions of this paper

Date Written: April 1999

Abstract

This study investigates the long-run return performance of non-U.S. firms that raise equity capital in U.S. markets. Overall, 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 and global benchmarks by 8% to 39% 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. Specifically, companies from emerging markets and those that issue equity by way of Rule 144A private placements significantly underperform publicly-listed issues and those of companies in developed markets. We also show that inter-market competition for order flow in the post-issuance period affects their long-run return performance. Post-issuance cumulative abnormal returns are most significantly and positively related to the ability of the offering to generate a larger share of U.S. trading volume.

JEL Classification: F30, G32, G15

Suggested Citation

Foerster, Stephen R. and Karolyi, George Andrew, The Long-Run Performance of Global Equity Offerings (April 1999). Dice Working Paper No. 99-4, Available at SSRN: https://ssrn.com/abstract=164991 or http://dx.doi.org/10.2139/ssrn.164991

Stephen R. Foerster

University of Western Ontario - Richard Ivey School of Business ( email )

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Canada
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George Andrew Karolyi (Contact Author)

Cornell University - SC Johnson College of Business ( email )

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ITHACA, NY 14853
United States
6142820229 (Phone)

HOME PAGE: http://https://www.johnson.cornell.edu/faculty-research/faculty/gak56/

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