Here and there: Cross-border evidence of commonality in liquidity of ADR in Asia pacific

This study examines the evidence for commonality in liquidity of the American Depository Receipts (ADR) in the context of Asia Pacific countries which are classified into developed markets (Australia, Hong Kong, Japan, New Zealand and Singapore) and emerging markets (China, India, Indonesia, South Korea, Malaysia, Philippines, Thailand and Taiwan). In order to understand the impact of cross listing towards co-movement in liquidity of stocks across border, liquidity features of each market are first evaluated. The ADRs from developed markets tend to be more liquid. In terms of commonality, this study shows (i) commonality in liquidity is evident at the firm level in which the emerging market displayed more co-movement in contrast with developed market; (ii) at the country level, commonality only indicated by weak sign in which the developed market tends to be higher than emerging market; (iii) at the regional level, the commonality of the ADR is also evident in which there is an influence of the ADRs from developed market on the emerging market, and (iv) commonality in liquidity of ADR still holds during the crisis period (based on robustness test).