Work detail

International Financing - Focused on GDR and ADR

Author: Mgr. Kateřina Holická
Year: 2004 - summer
Leaders: † prof. Ing. Michal Mejstřík CSc.
Work type: Finance and Banking
Language: English
Pages: 95
Awards and prizes: M.A. with distinction from the Dean of the Faculty of Social Sciences for an excellent state-final examination performance and for an extraordinarily good masters diploma thesis
Abstract: Depositary receipts have gained much popularity in the 1990s. After a slowdown in 2001/2002, year 2003 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 underlying shares are very closely correlated and the opportunity of arbitrage is therefore very limited.
To quantify the effects of a DR issue on the underlying 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 has a very positive impact on the underlying 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 underlying shares in the local market, was confirmed. The daily trading volumes improved on average by 21% in the year subsequent to the listing.
Downloadable: Diploma Thesis - Holická


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