Liquidity difference between non-U.S. and U.S. IPOs on the NYSE listings

Jang-Chul Kim (), Kaun Y. Lee () and Ha-Chin Yi ()
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Jang-Chul Kim: Northern Kentucky University
Kaun Y. Lee: Chung-Ang University
Ha-Chin Yi: Texas State University

Review of Quantitative Finance and Accounting, 2024, vol. 62, issue 1, No 13, 365-387

Abstract: Abstract We investigate liquidity and information asymmetry for a sample of non-U.S. stock listings and U.S. IPO listings on the NYSE. We find that non-U.S. stock listings tend to have wider spreads, larger price impact of trades, and higher probability of information-based trading than those of the U.S. IPOs. In addition, our results show that the differences in liquidity and information asymmetry are not transient; it has a long-term implication. Furthermore, liquidity and information asymmetry measures for non-U.S. stock listings are significantly related to the macro-institutional quality of their home countries such as political risk and absence of violence/terrorism, government effectiveness, voice and accountability, control of corruption, and rule of law. We find that non-U.S. stocks from countries with lower institutional quality metrics tend to have lower liquidity and higher information asymmetry. Therefore, improving a country’s institutional quality alleviates information problems and improves market liquidity for non-U.S. stocks listed in NYSE.

Keywords: Liquidity; Information asymmetry; Non-U.S. IPO; Spreads; Country risk; Institutional quality (search for similar items in EconPapers)
JEL-codes: G12 G15 (search for similar items in EconPapers)
Date: 2024
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DOI: 10.1007/s11156-023-01204-w

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