Andreas G. Merikas

Global shipping IPOs performance

We analyze the short and long-run price performance of 143Global Shipping IPOs listed during the 1984-2007 period in major Stock Exchanges computing buy and hold abnormal returns (BHAR) and cumulative abnormal returns (CAR). We find average underpricing for shipping IPOs is 17.69%. The light underpricing is positively related to the age of the firm, the reputation of the stock exchange they reach listing and the market condition of the period they go public and negatively related to the reputation of the underwriters. In the long-run, Shipping IPOs underperform after five months holding period. Specifically using the buy-and hold returns as a measurement for long-run performance, we find that investors who buy immediately after listing and hold shares for three years will make a loss of 15.72%. The survey suggests that global shipping industry surprises us regarding the maturity in the behavior of its investors.

“Harvesting” through Initial Public Offerings (IPOs): The Implications of Underpricing for the Small Firm

The existence of the phenomenon of “underpricing” has been well established for common stock initial public offerings (CSIPOs). However, the extent of underpricing varies from firm to firm. An examination of the prospectuses of different firms reveals that the motivation for going public varies, and that there are three types of offerings: pure primary offerings; pure secondary offerings; and mixed offerings. This study compares the average level of underpricing for pure primary offerings with that of mixed offerings for small firms in the over-the counter (OTC) capital market. The results of the study suggest that there are Implications of the type of offering for both the firm and the selling “harvesting” shareholders as well as the incoming investors.

Modelling the investment decision of the entrepreneur in the tanker sector: choosing between a second-hand vessel and a newly built one

It is often the case that the investor in the shipping sector faces the dilemma of investing in a second-hand vessel or building a new one. This happens because an active second-hand market for almost all kinds of vessels exists. We argue that one of the prime considerations for the investment decision should not be the price of the vessel per se, second-hand (SH) or newly built (NP) but  (a) the relative price ratio (SH/NP) second-hand price over the new building price and  (b) the movement of this ratio. We investigate the determinants of this ratio across different vessel sizes in the tanker sector and show that it can be used as an effective tool in investment decision as well as in asset appraisal. We employ monthly data between 1995 and 2006 for four different ship sizes–VLCC, Suezmax, Aframax and Handysize–and implement an error correction model. The investment decision depends on a number of risk and return variables as well as the perceived speed of adjustment of the price ratio to its equilibrium level. Overall we claim that the cyclicality of the shipping sector together with expectations formed by the agents operating in it (the entrepreneur, the ship-owner and the broker), determine the movement of the ratio and hence the decision of the entrepreneur.

Explaining house price changes in Greece

This article develops an equilibrium model for the Greek housing market that incorporates both macroeconomic and country-specific variables that affect demand for and supply of houses. In the overall upward phase of the 26-year period examined (1985Q1–2010Q4), our investigation of short-term fluctuations in real house prices and stock prices confirms the inverse relationship between movements in the housing price index and the stock exchange general index, identifies the direction of causality as running from the financial sector to the real sector and finds that, following an exogenous shock, reversion to the long-run equilibrium is a rather slow process. Furthermore, we identify a fundamental shift in the behaviour of Greek homeowners, who appear to be moving away from the treatment of housing as consumption good, towards treating house purchases as investment.

Stock Prices Response to Real Economic Variables: The Case of Germany

Purpose –This is a research paper aiming to re-examine Famas proxy hypothesis which states that inflation is negatively related to real economic activity and the negative relationship between stock returns and inflation reflects the positive impact of real variables on stock returns. Design/methodology/approach - Two issues are addressed, first if there is a relationship between the real and financial sectors and once this is established the next step is to investigate the type of relationship present. The study uses annual data covering the years 1960-2000, on the German economy, and builds a VAR model to test the hypothesis of the negative impact of real economic activity on stock returns. Findings - The findings suggest that in Germany employment growth has a negative effect on stock returns and influences positively inflation. The rational lies in the fact that employment growth forecasts inflation which is expected to erode firms profits. This is expressed through falling stock returns. Research limitations/implications- Germany is the largest economy in the European Union, the findings suggest that over the period under examination, the economy operated close to its potential level of output and this has implications for policy formulation. It would have been of interest to use quarterly data, so that the unification factor could be tested. More case studies to this direction should be undertaken. Originality/value - It adds to the understanding and knowledge on a debate that is as current as ever from the point of view of the macroeconomist as well as the politician.

The Theoretical Relationship between the Strategic Objective of Sales Growth and the Financial Policy of the Entrepreneurial Firm

ANDREAS MERIKAS IS WITH THE Department of Finance, Mississippi State University, Garry D. Bruton with the Department of Management and Marketing, University of Tulsa, Oklahoma, and George S. Vozikis holds the Alvan H. Chapman Jr. Chair in Business Administration, at The Citadel, Charleston, South Carolina, all in the United States of America. The purpose of this paper is to develop a simplified theoretical model which integrates an entrepreneurial firms strategic objective of sales growth with its capital structure and dividend policy objectives. Several theoretical relationships are developed betweent hese strategic and financial objectives, showing their strong interdependency, and the fact that the ultimate goal should be the management of this relationship rather than the maximisation of sales growth.

MEASURING CORPORATE ENTREPRENEURIAL PERFORMANCE: VALUE CREATION AS AN ALTERNATIVE APPROACH

ABSTRACT It has increasingly been recognized that appropriate theory based measures are required in entrepreneurial research (25). However, to date, the study of corporate entrepreneurship (CE) has principally used accounting measures which may not provide an accurate picture of the firms performance. This study examines value creation as an alternative approach to measuring the performance of corporate entrepreneurship.

The exchange rate exposure of Greek banking institutions

Outlines the effect of exchange rate fluctuations on bank performance and investigates the relationship between exchange rate exposure and stock value for eight major Greek banks. Explains the methodological problems involved, develops a mathematical model and applies it to 1995‐1998 data for the banks. Discusses the results for each bank individually and suggests that although their stock returns are affected by exchange rate variations, other factors (e.g. asset/liability structure, management style etc.) are also important. Calls for further research on the impact of changes in exchange rates.

Determinants of the probability of default: the case of the internationally listed shipping corporations

ABSTRACT In this study, we use a sample of 192 listed shipping companies and employ a logit model in order to investigate the determinants of the probability of default. We enhance our analysis by isolating not only the cases of company liquidations but also those cases where companies had to change their legal status due to warning liquidity signals. Our key findings are in line with prior research and moreover we depict a changing trend in the marginal effects of relevant variables, on the probability of default. We further show, through an empirical application, how the obtained results can be used in a managerial decision-making process and in a bank credit underwriting process in order to assess the creditworthiness of a shipping company.

Modelling and forecasting the demolition market in shipping

ABSTRACT We model the demolition market, an integral part of the international shipping industry. It is shown through the implementation of a Vector Autoregressive (VAR) model that international steel-scrap prices contribute decisively towards price discovery in the ship-demolition industry. Our finding is explained and attributed to the fact that the growth models of Southeast Asian countries, where the ship-demolition market is primarily located, rely on scrap metal imports. These are mainly obtained from the developed economies rather than the recycling of vessels. We then proceed to test the forecasting ability of our model and use it for price prediction in the ship-demolition market. We establish that it provides the decision-makers with a useful prediction tool which enables all stakeholders involved, the ship owner, the recycler and the cash buyer alike, to gain valuable insights of the underlying trend in the sector.