The implicit impact of cross-listing on stock prices: A market microstructure perspective – The case of LatinAmerican markets

Osmar Hazael Zavaleta Vázquez () and Jaime González Maiz Jiménez
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Osmar Hazael Zavaleta Vázquez: Tecnológico de Monterrey, EGADE Business School, México
Jaime González Maiz Jiménez: Universidad de las Américas Puebla, México

Contaduría y Administración, 2016, vol. 61, issue 2, 283–297

Abstract: The objective of this research is to evaluate the unobserved effect of cross-listing on stock prices of companies from Latin America. Particularly, we study the impact of the issuance of ADRs on volatility and efficiency in the local markets. We employ GARCH models to assess the impact on volatility, once the ADR has been issued, and ARMA models to evaluate the impact on efficiency, once the ADR is listed. Overall, we find that in 82% of the analyzed cases, at least one result shows improvement (i.e. lower volatility and/or more efficiency, once the corresponding ADR has been issued). Further, we find that once the electronic trading systems are implemented in emerging markets, there is an improvement in terms of the information environment, thus reducing the effects of cross-listing. This study contributes to the financial literature because it tests the impact of cross-listing on two specified market microstructure variables, namely volatility and efficiency, through a robust methodology.

Keywords: Cross-listing; Information environment; Microstructure; Volatility and efficiency (search for similar items in EconPapers)
Date: 2016
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Persistent link: https://EconPapers.repec.org/RePEc:nax:conyad:v:61:y:2016:i:2:p:283-297

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