Market segmentation theory versus issues of American Depositary Receipts. Results of empirical research of companies listed on the Warsaw Stock Exchange




share prices, CAR, cross-listing, ADR.


Background: In the era of increasing economic globalization, capital markets have become increasingly integrated. Companies listed on stock exchanges try to attract as many investors as possible, including foreign ones. This can be achieved by listing shares or securities based on these shares on markets outside the issuer’s country. One of the instruments that enable the movement of capital is the issue of depositary receipts. These receipts may affect the share prices of the companies on which they were issued.

Research purpose: The aim of the paper is to indicate whether the issuing of American Depositary Receipts (ADR), based on shares of companies listed on the Warsaw Stock Exchange, from mid- 2006 to mid-2019, resulted in a decrease in the cumulative abnormal returns of these companies on the primary market.

Methods: Thirty companies for which American Depositary Receipts were issued during the research period were selected. Using the daily rates of return calculated based on the closing prices of the analyzed companies, covering 125 days, the Sharpe single-index model was estimated for each of them. Then, the abnormal returns and cumulative abnormal returns were determined, taking 25 days as the period before and after the event, i.e., the issuing of receipts.

Conclusions: The research confirmed the hypothesis that there is a negative relationship between the period of issuing depository receipts and the rates of return of shares. It shows that the barriers in international financial markets diminish in time. Such results were obtained based on the entire sample as well as for the selected sub-periods. The cumulative abnormal returns took negative values, while in the second of the separated sub-periods, they were even lower. Therefore, it can be confirmed that the significance of market segmentation theory in shaping share prices in the primary market has decreased. It supports the thesis of diminishing divisions in international financial markets occurring in a large part of the world economy, which was also noticed earlier by other researchers


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How to Cite

Gabriel, B., & Majerowska, E. (2021). Market segmentation theory versus issues of American Depositary Receipts. Results of empirical research of companies listed on the Warsaw Stock Exchange. Studia Prawno-Ekonomiczne, 120, 179–196.