Cross‐Listing and Operating Performance: Evidence from Exchange‐Listed American Depositary Receipts

In this paper we examine the operating performance of non‐US firms that enter major US stock exchanges using American Depositary Receipt (ADR) programs. Our dataset consists of 108 capital‐raising and non‐capital‐raising firms from twenty four countries, cross‐listed on major US stock exchanges during the period 1994–2004. We provide evidence that capital‐raising cross‐listed firms experience improvements in their operating performance after the listing, relative to a non‐cross‐listed matched sample of firms and relative to the pre‐listing period, whereas non‐capital‐raising cross‐listed firms out‐perform a non‐cross‐listed matched sample of firms for both the pre‐listing and the post‐listing periods. These results suggest that the type of ADR program conveys information about changes in the post‐listing operating performance. Moreover, both capital‐raising and non‐capital‐raising cross‐listed firms have positive abnormal returns due to the cross‐listing and these abnormal returns are positively related with the post‐listing abnormal changes in operating performance, suggesting that the market anticipates the post‐listing abnormal changes in operating performance. Results are robust after adjusting for various firm and country risk characteristics.