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PurposeThe authors investigate how market quality diverges between foreign firms and domestic firms on the US stock market in response to the Russia–Ukraine conflict.Design/methodology/approachWith an event study approach, the authors compare foreign firms with domestic firms in their market responses over the three-day window around the outbreak of the war. Further, with Difference-in-Difference (DID) analyses, the authors study the change in foreign firms' market quality upon this outbreak in comparison with their domestic counterparts. Finally, the authors compare the foreign firms across firm specific characteristics and home country characteristics.FindingsThe authors find that foreign stocks listed in the US experience more severe market quality deterioration compared to the stocks' domestic counterparts. This effect is especially strong for companies from countries considered friendlier towards Russia and companies that are not cross-listed. The authors' findings are consistent with the information asymmetry hypothesis concerning market quality. Moreover, US market investors have more concerns over political risks with non-US-aligned political standings during war times.Research limitations/implicationsThe authors' findings are consistent with the information asymmetry hypothesis concerning market quality. Moreover, US market investors have more concerns over political risks over non-US-aligned political standings during war time.Practical implicationsSince both countries in the conflict are in Europe, the US stock market, to a certain degree, becomes a safe haven for capital from Europe and other countries. In the meantime, American Depository Receipts (ADRs) have been important for US investors to create a globally diversified portfolio, and the knowledge regarding ADRs' vulnerability to international geopolitical events is valuable. The author' results are informative for stock market investors to understand the market dynamics for international and domestic companies during this extremely uncertain time.Originality/valueThis is the first study that examines the market quality divergence between foreign firms and domestic firms on the US stock market in response to the Russia–Ukraine conflict. The authors provide novel evidence on the change in ADRs' market quality associated with significant political uncertainty. The authors show that ADRs' market quality is more vulnerable to international geopolitical risks relative to otherwise comparable domestic firms.

In this paper, I study trading activities prior to M&A announcements pertaining to the rivals of the merging firms. I find that not only acquirers and targets experience increases in abnormal trading activities in stock and option markets, but also their rivals. The rise in option trading is especially strong for options that informed traders are most likely to trade. I find that the implied volatility spread (IV spread) constructed from a rival’s option prices the day before the announcement can predict this rival’s cumulative abnormal return (CAR) over the M&A announcement window. As the IV spread is widely adopted as a proxy for informed trading activities in the option market, my findings provide evidence for information spillovers from merging firms to their rivals prior to the announcements of the M&A deals.