THE IMPACT OF INTERNATIONAL CROSS LISTINGS ON RISK AND RETURN - THE EVIDENCE FROM AMERICAN DEPOSITORY RECEIPTS

This paper examines the impact of the listing of American Depository Receipts (ADRs) on the risk and return of the underlying stocks. We find that the listing of ADRs is associated with positive abnormal returns to the underlying stock on the listing day. In addition, our results suggest that the listing of ADRs are associated with permanent increases in the return volatilities of the underlying stocks. We interpret this evidence as consistent with the existence of informed traders in the markets in which the ADRs and the underlying stocks trade.