ADR and Domestic Equity Offer Performance of Identical Firms

Abstract

We analyze and compare the underpricing and buy-and-hold returns of American Depositary Receipt (ADR) equity offers with preceding Initial Public Offerings (IPOs) and Seasoned Equity Offers (SEOs) of the same firms to identify differences and motivations of equity offerings free of any matching bias. We find that domestic equity offerings entail significantly larger underpricing than subsequent foreign equity offerings. The average market-adjusted buy-and-hold returns of depositary receipt equity offers are significantly lower than the underlying firm’s performance at preceding domestic equity issuances over holding periods of 1 to 5 years after the respective issuances.