We investigate the long-run return performance of
non-U.S. firms that raise equity capital in U.S.
markets. Overall, between 1982 and 1996, our sample
of 333 global equity offerings with U.S. depositary
receipt (ADR) tranches from 35 countries in Asia,
Latin America, and Europe under-perform local market
benchmarks of comparable firms by 8%–15% over the
three years following issuance. We show that
differences in long-run returns are related to the
scope and magnitude of investment barriers that
induce segmentation of capital markets around the
world. While companies from markets with significant
investment barriers for foreigners that issue equity
on major U.S. exchanges outperform their benchmarks,
those from segmented markets that issue equity in
the U.S. by way of Rule 144A private placements
significantly under-perform. We also show that
inter-market competition for order flow in the
post-issuance period affects long-run return
performance. Post-issuance buy-and-hold abnormal
returns are most significantly and positively
related to the offering's ability to generate a
larger share of U.S. trading volume.