Influence of ADR Prices on Stock Prices

stock exchanges to leading financial centres has adverse consequences on the overall quality of the local market. •

The whole market activity development is thus tightly connected with the behaviour of the two shares. We can therefore not easily differentiate between the market wide and stock-specific influences.

Based on the above findings she concluded her study as follows •

The DR and underlying share’s share’s pri ces of CE companies turned out to be almost perfectly correlated; hence there don’t seem to be many opportunities for profitable arbitrage. Such a result supports the hypothesis of markets integration

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It is usually expected that a DR issue lowers cost of capital to the company; lower cost of capital implies higher shareholder value, which is reflected in the DR Price.

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A range of different DR types has evolved to satisfy the needs of all investors and issuers. The most frequently chosen approach by the CE companies was a simultaneous offering to institutional investors in the US and in London.

A research paper was submitted sub mitted by Dr. Mahu Kalimpali and Dr. Latha Ramachand to the National stock Exchange (NSE) (NSE) of India. In their paper Dr Mahu Mahu Kalimpali and Dr Latha Ramachand studied 49 firms’ equity equit y issues. issues . Dr Mahu Kalimpali and Dr Latha Ramachand examined volatility of returns, volumes and price range measures for a sample of Indian firms that raise equity capital on foreign markets. They found that •

On average there is a decline in returns, volatility of daily high/low price range of the firms‘equity on the local market subsequent to the foreign capital raising event.

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Volatility of the underlying returns is higher after the equity issue.