Auf Englisch:
Under the communistic regime whole economy was controlled by the Central Planning Office. When the communistic regime collapsed the whole economy had to be transformed in order to meet open market standards. One of these standards is privatisation process. Hungary, Czech Republic and Poland choose a different approach to this issue, because they implied different strategies. Actually you can speak about three different privatisation scenarios.
Auf Deutsch:
Alle drei Länder haben 1989 am gleichen Startpunkt angefangen, sie mussten nämlich Marktwirtschaftreformen und Privatisierung durchführen. Kurz nach dem Start haben sich aber ihre Wege getrennt. Nach 17 Jahren kann man von über 3 verschiedenen Privatisierungsbeispielen sprechen. Dieses Thema ist ziemlich unfangreich, deshalb möchte ich mich nur auf den Underpricingeffekt in Polen, Ungarn und Tschechien konzentrieren. Meine Ergebnisse zeigen, dass dieser Effekt in diesen 3 Ländern unterschiedlich stark ist und die Privatisierungsmethode ihn beeinflussen könnte. Auf der ungarischen und polnischen Börse kann man die „heißen“ und „kalten“ Phasen erkennen. Ziemlich unüblich ist, dass man den „money left on the table“-Effekt in Polen beobachten kann, aber die Geldsummen minimal sind.
Table of Contents
1. INTRODUCTION
2. TRANSFORMATION PROCESS
2.1. A FEW WORDS ABOUT PLANNED ECONOMICS
2.2. PRIVATISATION IN POLAND
2.3. PRIVATISATION IN CZECH REPUBLIC
2.4. THE PRIVATISATION IN HUNGARY
3. MOTIVES FOR GOING PUBLIC
3.1. VALUE MAXIMIZING PRINCIPLE
3.2. TECHNOLOGICAL INNOVATION
3.3. MARKET TIMING THEORY
3.4. PRIVATISATION
3.5. POLITICAL REASONS
4. THE UNDERPRICING IN LITERATURE
4.1. SHORT-TERM UNDERPRICING
4.1.1. The Winner’s curse theory
4.1.2. The information cascade theory
4.1.3. Bookbuilding theory
4.1.4. Lemon problem
4.1.5. Insurance against legal liability
4.2. LONG-TERM UNDERPRICING
4.2.1. Stockownership and IPO
4.2.2. Impressario hypothesis
4.2.3. Marketing in IPO process
5. SAMPLE AND METHODOLOGY
6. DESCRIPTIVE ANALYSIS
6.1. PRAGUE STOCK EXCHANGE
6.2. BUDAPEST STOCK EXCHANGE
6.3. WARSAW STOCK EXCHANGE
6.3.1. The unusual year 1993
7. RESULTS ANALYSIS
7.1. UNDERPRICING IN CZECH REPUBLIC
7.2. UNDERPRICING IN HUNGARY
7.3. UNDERPRICING IN POLAND
8. SUMMARY
Research Objectives and Themes
This thesis examines the underpricing phenomenon of Initial Public Offerings (IPOs) in Poland, Hungary, and the Czech Republic from 1991 to 2006. The central research question explores how the transition from planned economies to market-based systems influenced IPO performance and whether traditional financial theories regarding underpricing are applicable in these emerging market contexts.
- Economic transformation and privatisation strategies in Eastern Europe.
- Theoretical frameworks of short-term and long-term IPO underpricing.
- Comparative empirical analysis of stock exchanges in Warsaw, Budapest, and Prague.
- The impact of political factors, market timing, and investor sentiment on share valuation.
- Statistical evaluation of market performance across various economic cycles.
Excerpt from the Book
3.1. Value maximizing principle
Zingales (1995) says that the decision to go public is based on the value maximizing principle, because the owner wants to sell his company at the highest possible price. According to his explanation the initial owner changes the distribution of cash flow and controlling rights by sharing them with potential buyers. This is a bargain process between new shareholders and owners. The owner will try to maximize his utility function, lose as little control as possible and sell shares at the highest price. Since the market of corporate control is not competitive the owner has to adjust his utility function in order to make a placement. The author identifies two sources of the buyer’s higher valuation that he tries to measure: cash flow and control. These two sources have a different nature. Cash flow is distributed among all shareholders. The amount of cash received is proportional to the size of equity. The market for cash flow rights is fully competitive for small shareholders, because the ownership can be easily changed. For the incumbent it is most profitable to sell shares to small, dispersed shareholders. The market situation for controlling blocks is different, because there are few institutional investors that have the resources to acquire the rights and they have more bargaining power. For the incumbent it will be difficult to sell his ownership with maximal value through the bargaining process. The author concludes that IPO gives a fair value for the owner without the bargaining process. According to Zingales the value maximizing principle is to hold the company private and bargain with a potential buyer. The only reason why an owner is willing to sell his company is the value maximizing principle.
Summary of Chapters
1. INTRODUCTION: Provides an overview of the political and economic transformation in Eastern Europe and sets the context for investigating the IPO underpricing effect in the region.
2. TRANSFORMATION PROCESS: Details the economic background of planned economies and the specific privatisation methods employed in Poland, the Czech Republic, and Hungary.
3. MOTIVES FOR GOING PUBLIC: Discusses various theories explaining why companies choose to go public, including value maximization, technological innovation, market timing, and political motivations.
4. THE UNDERPRICING IN LITERATURE: Reviews existing literature on short-term and long-term underpricing, including theories like winner’s curse, information cascades, bookbuilding, and the lemon problem.
5. SAMPLE AND METHODOLOGY: Outlines the data collection from Reuters and the mathematical formulas used to calculate returns and regression models.
6. DESCRIPTIVE ANALYSIS: Presents the statistical data and performance results for the Prague, Budapest, and Warsaw Stock Exchanges, including an analysis of the unusual year 1993 in Poland.
7. RESULTS ANALYSIS: Compares the empirical findings across the three countries and evaluates them against international research and market conditions.
8. SUMMARY: Synthesizes the main findings regarding the privatisation impact and the underpricing performance across the observed Central European markets.
Keywords
Initial Public Offering, IPO, Underpricing, Privatisation, Eastern Europe, Poland, Hungary, Czech Republic, Stock Exchange, Market Timing, Transition Economy, Financial Markets, Equity, Capitalisation, Valuation.
Frequently Asked Questions
What is the core focus of this research?
The research focuses on the underpricing effect of IPOs in the emerging markets of Poland, Hungary, and the Czech Republic between 1991 and 2006, investigating how this phenomenon relates to their economic transitions.
What are the primary thematic fields covered?
The work covers privatisation processes, financial market development, IPO underpricing theories, and the influence of macroeconomic factors on investor behavior.
What is the main goal of the study?
The primary goal is to determine if traditional Western theories of IPO underpricing can explain the performance of firms in post-communist transition economies.
Which scientific methodology is applied?
The author uses descriptive statistics and time-series regression analysis to identify the influence of variables like P/E ratios, market capitalisation, and industry type on IPO returns.
What is covered in the main body of the text?
The main body examines the history of privatisation, theoretical underpinnings of underpricing, empirical descriptive analysis of three major regional stock exchanges, and the resulting regression analysis of factors affecting performance.
Which keywords best characterize this work?
Key terms include IPO, Underpricing, Privatisation, Eastern Europe, Market Timing, and Transition Economy.
Why was the year 1993 considered unusual for the Polish market?
The year 1993 was extraordinary due to extreme underpricing of two new listings, Vistula and Mostostal Warszawa, which were largely unknown to investors and suffered from long-term illiquidity.
How does the privatisation method influence the underpricing effect?
The study suggests that different methods, such as voucher programs versus direct sales, create different levels of investor demand and uncertainty, which in turn impact the level of underpricing required to attract investors.
- Citar trabajo
- Tomasz Drobniak (Autor), 2008, Underpricing effect in Poland, Hungary and Czech Republic, Múnich, GRIN Verlag, https://www.grin.com/document/112067
