Global markets exposure and price efficiency: An empirical analysis of order flow dynamics of NYSE-listed Indian firms

Abstract

We examine the effect of global competition for order flows, which arise due to listing of American Depository Receipts (ADRs) by six Indian firms on the NYSE, on the local market. Using order imbalance data for six months pre- and post-listing periods, which captures order flow dynamics, we show that price formation is more efficient in the post-listing period compared to pre-listing period. We also provide additional evidence on the local market quality due to ADRs listing. © 2011 Elsevier B.V.