Influence of Depositary Receipts on Companies’ Performance: Evidence from Eastern Europe

by Zayachuk, Iryna

Depositary Receipts (DR) are negotiable certificates that represent a foreign company’s publicly traded equity. There is a growing development of DR programs in Eastern Europe in the last decade. The major research question addresses the issue of how capital injection as a result of DRs influences the performance of firms in Eastern Europe. We compare financial performance measures of asset management efficiency, profitability and market value of companies before and after DR program affiliation. Further, the Chow test for equality between sets of coefficients in two linear regressions is applied. There has been a slight influence on the companies’ assets and profitability in the short-run and there has been no influence on companies’ asset performance and sales in the long-run after the DR program announcement. DR program announcement makes a positive effect on the CEE companies’ market value and stock performance the short-run and the negative effect in the long-run.