The financial performance of privatised firms: evidence from three transition economies

There is a gap between the theoretical literature which almost unanimously advocates privatisation of banks and enterprises as a part of the solution for the commitment problem in economies in transition, and empirical evidence on how best to design a privatisation programme in order to secure an efficient use of resources. This thesis contributes to this debate by focusing on privatisation programmes and the financial performance of privatised enterprises in Poland, Hungary, and the Czech Republic. This is the first comprehensive comparative study on the short and long run financial performance of privatisation share issues in these countries. The thesis builds on privatisation theories formulated in Perotti (1995) and Perotti and Biais (1997), and the empirical evidence on performance of privatisation share issues presented in Perotti and Guney (1993), Dewenter and Malatesta (1997), and Megginson et al. (1998a). Alternative privatisation schemes are assessed not only on the grounds of speed and effect on the state budget, but also with regard to the benefits they bring to domestic and foreign shareholders in privatised companies. The results provide support for the underlying political and economic theories on privatisation and reveal the importance of a choice of privatisation methods to enhance the financial performance of newlyprivatised enterprises in transition economies

Corporate insider trading in Europe

We analyse stock price behaviour around the disclosure of corporate insider transactions after the introduction of the Market Abuse Directive (MAD). Ranking according to our Insider Trading Enforcement (ITE) index highlights significant differences in the MAD enforcement between French and German legal origin countries. We document contrarian behaviour of insiders in all of the sample countries. Insiders reveal significant information to the public through both their purchases and sales. The price impact of the insiders’ transactions is particularly strong in countries with a lower ITE index (i.e. weaker public enforcement)

Mean univariate- GARCH VaR portfolio optimization: actual portfolio approach

In accordance with Basel Capital Accords, the Capital Requirements (CR) for market risk exposure of banks is a nonlinear function of Value-at-Risk (VaR). Importantly, the CR is calculated based on a bank’s actual portfolio, i.e. the portfolio represented by its current holdings. To tackle mean-VaR portfolio optimization within the actual portfolio framework (APF), we propose a novel mean-VaR optimization method where VaR is estimated using a univariate Generalized AutoRegressive Conditional Heteroscedasticity (GARCH) volatility model. The optimization was performed by employing a Nondominated Sorting Genetic Algorithm (NSGA-II). On a sample of 40 large US stocks, our procedure provided superior mean-VaR trade-offs compared to those obtained from applying more customary mean-multivariate GARCH and historical VaR models. The results hold true in both low and high volatility samples

Market risk management in a post-Basel II regulatory environment

We propose a novel method of Mean-Capital Requirement portfolio optimization. The optimization is performed using a parallel framework for optimization based on the Nondominated Sorting Genetic Algorithm II. Capital requirements for market risk include an additional stress component introduced by the recent Basel 2.5 regulation. Our optimization with the Basel 2.5 formula in the objective function produces superior results to those of the old (Basel II) formula in stress scenarios in which the correlations of asset returns change considerably. These improvements are achieved at the expense of reduced cardinality of Pareto-optimal portfolios. This reduced cardinality (and thus portfolio diversification) in periods of relatively low market volatility may have unintended consequences for banks’ risk exposure

Impact of covered warrants expirations on underlying shares in Taiwan

We examine the Taiwanese market for covered warrants, and the impact of the expiration of a covered warrant on the returns, and trading volume of the underlying stock. This paper seeks to address the impact of warrant expiration on the underlying shares. It proposes several sample groups in which such impact may emerge different outcome. Overall, the hypotheses of there are significant price effect and abnormal trading volume around the warrant expirations cannot be rejected. The hypotheses of different price effect and trading volume in sub groups also have been confirmed. This study makes extensive of data from Taiwanese market and several sample groups; the empirical analysis can also serve as a means to improve academic knowledge of impact derivative expiration event on the underlying shares. We conclude that the feature of the sample set does generate different results and we also provider alternative explanations to the empirical outcome

The financial performance of privatised firms: evidence from three transition economies

There is a gap between the theoretical literature which almost unanimously advocates privatisation of banks and enterprises as a part of the solution for the commitment problem in economies in transition, and empirical evidence on how best to design a privatisation programme in order to secure an efficient use of resources. This thesis contributes to this debate by focusing on privatisation programmes and the financial performance of privatised enterprises in Poland, Hungary, and the Czech Republic. This is the first comprehensive comparative study on the short and long run financial performance of privatisation share issues in these countries. The thesis builds on privatisation theories formulated in Perotti (1995) and Perotti and Biais (1997), and the empirical evidence on performance of privatisation share issues presented in Perotti and Guney (1993), Dewenter and Malatesta (1997), and Megginson et al. (1998a). Alternative privatisation schemes are assessed not only on the grounds of speed and effect on the state budget, but also with regard to the benefits they bring to domestic and foreign shareholders in privatised companies. The results provide support for the underlying political and economic theories on privatisation and reveal the importance of a choice of privatisation methods to enhance the financial performance of newly privatised enterprises in transition economies