Varma, 1991, "On the Integration of International Capital Markets: Evidence of Euroequity
Offerings," Financial Management 20, 11-21.
However, in their sample of 32 issues of Euroequity made by 30 companies from 1985 to 1988, they found the response being proportionally smaller the larger the proportion of the Euroissue financed offshore.
On The Integration of International Capital Markets: Evidence From Euroequity Offerings, Financial Management, Winter 1991.
Euroequity is thus a registered new issue of stock by an American corporation that is sold simulataneously in two tranches; one tranche is sold to investors at home as standard registered shares and the other tranche is sold abroad as targeted registered shares.
In perfectly integrated capital markets, whether a corporation chooses to issue Euroequity or domestic equity should not have a differential effect on the price of its stock.
We test capital market integration by comparing the two-day announcement returns of 32 Euroequity with 196 domestic-equity offerings by American corporations during the period 1985-1988.
Section II outlines the expected stock-price effects from issuing Euroequity by associating it with previous research on international listings.
We assume that the motivations of corporations issuing Euroequity are similar to those for issuing government bonds under the targeted registered offering procedure.
3) Euroequity also makes it easier for foreign investors to hold stock in U.
They may benefit because transactions costs are lower; because the foreign-listed stock is traded in their home currency (whereas Euroequity is denominated in dollars); because there may be reductions in information barriers if the foreign listing results in additional financial disclosure offshore; and, according to Smith .