The valuation of ADR IPOs

Weidong Huo, Chengbo Fu, Ying Huang and Steven Xiaofan Zheng

Journal of International Financial Markets, Institutions and Money, 2018, vol. 53, issue C, 215-226

Abstract: We examine the valuation of ADR IPOs and find that they are valued similarly to U.S. domestic IPOs but significantly higher than U.S. seasoned firms. This higher valuation is not caused by differences in firm size, growth opportunity, profitability, listing exchange, diversification benefit, foreign exchange risk, investor protection, or market liquidity as suggested by previous studies. Moreover, they experience significant declines in earnings and their stocks underperform U.S. seasoned by more than 20% in the three years after IPO. We show that ADR IPOs are timed to take advantage of overoptimistic in U.S. equity markets, supporting windows of opportunity theory.

Keywords: Valuation; ADR IPO; Equity markets; Windows of opportunity theory (search for similar items in EconPapers)
JEL-codes: G15 G32 (search for similar items in EconPapers)
Date: 2018
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Citations: View citations in EconPapers (3)

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Persistent link: https://EconPapers.repec.org/RePEc:eee:intfin:v:53:y:2018:i:c:p:215-226

DOI: 10.1016/j.intfin.2017.09.024

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