THE DECLINING MARKET REACTION TO ADR ISSUERS IN EMERGING MARKETS

Current literature shows evidence of the gradual nature of international market integration. This would suggest, at the company level, a general pattern of a declining marginal cost of capital effect for each subsequent firm issuing American Depositary Receipts from the same market. This study finds that the marginal listing firm experiences a significantly smaller change in the cost of capital during listing than that of previous listing firms from the same market. A declining reaction found during the announcement period is not significant. The results are robust to changes in local and US market risks from period to period.