Wolfgang Aussenegg

The Operating Performance of Newly Privatised Firms in Central European Transition Economies

This study examines the operating performance of privatised firms in three Central European Transition Economies between 1990 and 1998. Overall, we find no evidence of a significant improvement in operating performance for the first six years after privatisation. Contrary to the increasing empirical evidence for non-transition economies, our privatised firms experience no improvement in profitability, capital investments, efficiency, and output, a significant drop in employment, as well as a significant increase in leverage. The most important determinants of the performance changes following privatisation were country effects, timing of the privatisation sales, industry classification, and state ownership after privatisation. Our findings are consistent with the empirical evidence that the transition process proved to be more difficult than expected and that, although necessary, privatisations do not necessarily produce equal efficiency gains in transition economies (Megginson, 2005; Havrylyshyn and McGettigan, 1999).

Operating Performance of Privatized Companies in Transition Economies - The Case of Poland, Hungary and the Czech Republic

We examine operating performance of 154 Polish, Hungarian and Czech companies that were fully or partially privatized between January 1990 and December 1998. Overall, our results are different from results of similar studies on operating performance of companies privatized in developed and other developing countries (Souza and Megginson, 1999; Boubakri and Cosset, 1998). For example, privatized firms in our sample did not manage to increase profitability, and significantly reduced efficiency and output in the post-privatization period. Enterprises privatized through mass privatization programs (Czech SOEs) achieved lower profitability in the post-privatization period compared to their counterparts privatized through case-by-case method. Czech companies have also maintained much higher bank borrowings after privatizations then their Polish and Hungarian counterparts. We further document that private sector IPOs underperform their privatization counterparts in terms of profitability, efficiency, capital investments and output. Finally, firms size does not seem to influence key performance measures in selected countries.

Common Factors in the Performance of European Corporate Bonds – Evidence Before and After the Financial Crisis

We examine monthly excess returns for 23 Euro�?denominated corporate bond indices and propose a new specification for bond asset pricing models. Specifically, we separate level and slope components of term and default risk factors and examine liquidity risk. Our results suggest that level and slope risk factors, derived from complete interest rate and default spread term structures, significantly improve the explanatory power of the Fama and French (1993) 2�?factor model. We also demonstrate different sensitivities of risk factors before and after recent financial crisis. The results are robust to calendar seasonality and the consideration of equity market returns.

Corporate Insider Trading and the Short-Run Price Impact of Private Information in Continental Europe

We analyze the stock price behavior around the disclosure of corporate insider transactions. Our sample consists of 1,242 public traded companies located in seven (continental) European countries. We document that insiders reveal information to the public through their trading activities and that they act as contrarian investors. They are timing their trades in buying shares after stock price declines and in selling shares after stock price augmentations. This general observation is mainly driven by German law countries and declines over time. We also show that parameters like transaction size and firm size significantly influences the price impact of insider trades.

Underpricing and the aftermarket performance of initial public offerings: The case of Austria

Publisher Summary This chapter investigates the price behavior of initial public offerings (IPOs) of equities listed on the Vienna Stock Exchange during the period from 1984 to 1996. For a total sample of 67 IPOs, an average first-day return of only 6.5% is documented. The cross-section of initial abnormal returns can best be explained by the ex-ante uncertainty about the value of the issue and the existence of hot-issue and cold-issue periods. Till the fifth anniversary of public listing, Austrian IPOs significantly underperformed benchmark firms. This phenomenon can be best explained by cross-sectional differences in the ownership structure. Several hypotheses to explain the observed underpricing of Austrian IPOs have been tested. The empirical findings only show support for the ex-ante uncertainty and the market climate hypotheses. The underpricing level is significantly positive in relation to the return standard deviation in the short-term aftermarket and to the stock market performance in the last 3 months prior to the IPO. On the other hand, the underwriter reputation and signaling hypotheses do not explain the cross-sectional differences in the level of underpricing. An additional explanation for the observed underpricing could be Rocks winners curse hypothesis. Although it is not possible to directly test this hypothesis due to the lack of a standardized rationing procedure, there is a tendency for the allocation to be lower for underpriced issues than for overpriced ones, so that the allocation-adjusted average initial return should be smaller than the unadjusted 6.5%.

European asset swap spreads and the credit crisis

We examine time-varying behaviour and determinants of asset swap (ASW) spreads for 23 iBoxx European corporate bond indexes from January 2006 to January 2009. The results of a Markov switching model suggest that ASW spreads exhibit regime-dependent behaviour. The evidence is particularly strong for Financial and Corporates Subordinated indexes. Stock market volatility determines ASW spread changes in turbulent periods, whereas stock returns tend to affect spread changes in calm periods. While market liquidity affects spreads only in turbulent regimes the level of interest rates is an important determinant of spread changes in both regimes. Finally, we identify stock returns, lagged ASW spread levels, and lagged volatility of ASW spreads as major drivers of the regime shifts. The results are robust in the extended sample (January 2006 to October 2013) that includes a post-crisis period.

Simple Time-Varying Copula Estimation

This article examines the ability of time-varying Gaussian and Student t copulas to accurately predict the probability of joint extreme co-movements in stock index returns. Using a sample of more than 20 years of daily return observations of the Eurostoxx50 and Dow Jones Industrial stock indices, Gaussian and Student t copulas are calibrated daily on a rolling window of the 250 most recent observations. We do not make assumptions on the functional form of the marginal distributions. Thus, the focus remains on the examination of the appropriateness of the two types of copulas. One of our findings is that there are time periods when the assumption of a Gaussian copula seems to be accurate and when the hypothesis of a Gaussian copula cannot be rejected in favor of a Student t copula. In other time periods, the hypothesis of a Gaussian copula can be rejected, as it underestimates the probability of joint extreme co-movements. This time periods of joint extreme co-movements are typically associated with a higher volatility environment and higher correlations between stock index returns. In applying a hit test to examine the ability of both copulas to predict the probability of joint strongly negative returns of both indices, we reject the null hypothesis of a Gaussian copula while the null hypothesis of a Student t copula cannot be rejected.

Legal Corporate Insider Trading and the Price Impact of Private Information: Evidence for Germany

This study examines the information value of corporate insider trading disclosures for a sample of 490 German companies. Our results indicate that insiders selling stocks in their own company reveal negative information about the in- trinsic firm value. This is especially the case for large volume sale transactions. In addition, stock prices of smaller com- panies react stronger to insider transactions. Furthermore, insiders tend to time their transactions, selling shares after stock price increases and buying shares after stock price decreases.

Forschungsbericht zum Projekt “Die Dynamik von Asset Swap Spreads am europäischen Markt für Unternehmensanleihen”

Anleihen sind fur Industrieunternehmen eine zunehmend wichtige Quelle der Unternehmensfinanzierung. Insbesondere in den letzten Jahren ist dieser Trend verstarkt beobachtbar. Die mit Anleihen verbundenen Finanzierungskosten hangen neben dem allgemeinen Zinsniveau vor allem auch von der Bonitat der Unternehmung ab. Ein relativ neuer Ansatz zur Kreditrisikomessung sind so genannte Asset Swap (ASW) Spreads, die - im Gegensatz zu CDS - aus Anleihepreisen direkt ermittelt werden und damit frei von Effekten am Derivate Markt sind.

A Soft Bail-Out Concept to Reduce Contagion in Financial Systems

Problem: The financial crisis of 2007-2009 has shown that regional problems in the financial industry can quickly spread over to the complete financial system and can even affect the worldwide economy. Thus, current financial systems are characterized by a high degree of interconnections and consequently a high amount of system risk. Objective: To reduce systemic risks, regulators and governments have to understand their main drivers. Upon this understanding, they need concepts of how to use most efficiently funds of new bank taxes. Method: By modeling the financial system with its interactions as stochastic processes we are able to simulate the two main reasons for systemic risks – macroeconomic shocks and contagion – at the same time. Results: Based on our model of the financial system we propose the new concept of soft-bail-outs. Compared to the current best practice of bank bail-outs, soft-bail-outs tend to reduce the probability of default of the whole financial system, lower the bail-out costs, and decrease the bail-out cost volatility. Application: This new concept of soft-bail-outs and the understanding of sensitivities to systemic risk can help regulators and governments to strengthen the financial system with fewer costs. In particular, we derive three suggestions to regulators of how to adapt the current regulatory regime.