ADR/GDR Potential in Central Europe

Kateřina Tsolov ()
Additional contact information
Kateřina Tsolov: Institute of Economic Studies, Faculty of Social Sciences, Charles University, Prague, Czech Republic, http://ies.fsv.cuni.cz/

No 92, Working Papers IES from Charles University Prague, Faculty of Social Sciences, Institute of Economic Studies

Abstract: Depositary receipts gained much popularity in the 1990s. After a slowdown in 2001/2002, years 2003 and 2004 brought a renewed progress of the DR markets. Also Central European companies are gradually becoming aware of the advantages of DR offering. In line with the market segmentation hypothesis, we found, that the prices of depositary receipts by Central European companies and their respective actual shares are very closely correlated and the opportunity of arbitrage is therefore very limited. To quantify the effects of a DR issue on the respective actual shares in the local market, we considered 19 shares of companies from the Czech Republic, Hungary and Poland, which issued depositary receipts. The results show that creation of a DR program may have a positive impact on the respective actual shares’ value. The simple average of value added to the share price one year after establishment of the DR program reached very high, positive value; the price increase (from the level of the day 20 prior to the issue) equaled 33.33%. On the other hand, with 7 out of 19 shares no positive effect of DR offering on price could be observed. On the same sample, the hypothesis, that a DR listing enhances liquidity of the respective actual shares in the local market, was confirmed. The daily trading volumes improved on average by 21% in the year subsequent to the listing.

Keywords: Depositary Receipts; cross-listing; Central European stocks; market integration; stock performance; liquidity effects (search for similar items in EconPapers)
JEL-codes: G14 G15 G29 G34 (search for similar items in EconPapers)
Pages: 26 pages
Date: 2005, Revised 2005
New Economics Papers: this item is included in nep-tra
References: View references in EconPapers View complete reference list from CitEc
Citations:

Downloads: (external link)
http://ies.fsv.cuni.cz/default/file/download/id/2656 (application/pdf)
Our link check indicates that this URL is bad, the error code is: 404 Not Found (http://ies.fsv.cuni.cz/default/file/download/id/2656 [301 Moved Permanently]--> https://ies.fsv.cuni.cz/default/file/download/id/2656)

Related works:
This item may be available elsewhere in EconPapers: Search for items with the same title.

Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text

Persistent link: https://EconPapers.repec.org/RePEc:fau:wpaper:wp092

Access Statistics for this paper

More papers in Working Papers IES from Charles University Prague, Faculty of Social Sciences, Institute of Economic Studies Contact information at EDIRC.
Bibliographic data for series maintained by Natalie Svarcova ().