Title

Market Segmentation and the Cost of Capital in International Equity Markets

Publication Date

1-23-2001

Abstract

While theoretical models predict a decrease in the cost of capital from depositary receipt offerings, the economic benefits of this liberalization have been difficult to quantify. Using a sample of 126 firms from 32 countries, we document a significant decline in the cost of capital of 42 percent. In addition, we show the decline is driven by the ability of U.S. investors to span the foreign security prior to cross-listing. Our findings support the hypothesis that financial market liberalizations have significant economic benefits.

Document Type

Article

Keywords

cost of capital, depositary receipts, liberalization

Disciplines

Finance

Source

SMU Cox: Finance (Topic)

Language

English

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