Information, Announcement, and Listing Effects of ADR Programs and German-U.S. Stock Market Integration

This article analyzes the impact on stock prices in the home market of important events associated with a U.S. listing. Events include the "filing effect" of financial statements made public by the SEC in preparation for an ADR program; the "announcement effect" of the forthcoming ADR program; and the "listing effect" of the first day of U.S. trading. The sample includes German firms that listed in the U.S. between 1991 and 1997. While German accounting standards allow firms to show profits when U.S. GAAP would show losses, we find that the reconciliation to U.S. GAAP reported in the "filing effect" is associated with positive abnormal returns. Perhaps this reflects self-selection where firms with nothing to hide list in the U.S. The announcement effects are mixed across firms. The listing effect is associated with positive abnormal returns. We also find some evidence of volume migrating from the home market to the U.S. after U.S. trading begins.