Conditional Performance Evaluation for German Mutual Equity Funds

We investigate the performance of a sample of German mutual equity funds over NEWLINE the period from 1994 to 2003. Our general finding is that mutual funds, on average, NEWLINE hardly produce excess returns relative to their benchmark that are large enough to NEWLINE cover their expenses. This conclusion is drawn from a variety of model specifications NEWLINE and is robust to many different benchmarks. Compared to unconditional NEWLINE measures, fund performance substantially deteriorates when we measure conditional NEWLINE alphas both in single-index and multi-factor models. We also measure fund NEWLINE performance in the Euler-equation framework and test several specifications of the NEWLINE stochastic discount factor using GMM. The result that funds underperform even before NEWLINE costs is even more pronounced. Overall, given the fact that stock returns are to NEWLINE some extent predictable by using publicly available information, conditional analysis NEWLINE raises the hurdle for active managers seeking abnormal positive performance, NEWLINE because it gives them no credit for exploiting readily available information

Initial Public Offerings, Subsequent Seasoned Equity Offerings, and Long-Run Performance: Evidence from IPOs in Germany

The objective of this study is to investigate the long-run performance of initial public offerings (IPO) in Germany for the period from 1977 to 1995. Of particular interest is to examine whether underpricing and the timing of subsequent seasoned equty offerings (SEO) may help to explain why some firms have substantial positive and others have substantial negative long-run abnormal holding period returns after going public. We find significant empirical evidence that firms that raised additional funds after an IPO through a seasoned equity offering outperformed the market. There is a significant difference in returns relative to the firms that had no subsequent equity offering. A comparison of seasoned equity offerings of IPOs and of established firms suggests that the information asymmetry is more pronounced for IPO firms

Why does mutual fund performance not persist? The impact and interaction of fund flows and manager changes

This paper investigates the reasons for the lack of long-term persistence in the investment performance of actively managed equity mutual funds. We document that the responses of investors, fund managers, and investment management companies to past performance have an important impact on future performance. Conditioning on fund flows and manager changes allows us to predict future performance of both past outperforming (winner) and past underperforming (loser) funds. Recent winner funds, experiencing neither high inflows nor the departure of a skilled fund manager, outperform by 3.60 percentage points based on risk-adjusted returns in the following year, relative to winner funds suffering from both effects. We also find that the performance of the worst performing funds experiencing both the replacement of the fund manager (internal governance) and high outflows (external governance) enjoy a subsequent increase in performance of 2.40 percentage points in the following year, relative to loser funds not experiencing these effects. Among loser funds, in particular, both mechanisms appear to interact strongly.Mutual Funds; Performance Persistence; Fund Flows; Manager Turnover

Exit Strategies of Venture Capitalists in Hot Issue Markets: Evidence from the “Neuer Markt in Germany

In this study we analyze the IPO exit behavior of venture capitalists (VCs) in the Neuer Markt, the former market for young growth companies in Germany. We find empirical evidence that VCs were able to time their exit quite successfully in the primary market and to some extent also in the secondary market. The larger the number of shares being sold by the VCs at the IPO date, the lower is the IPO performance after expiration of the lock-up period. In addition, the firms that went public in the year 2000 planned their IPO too late in the stock market cycle so that--due to the mandatory lock-up period of six months--some VCs had no chance for a lucrative exit and still owned shares three years after the IPO. Thus, lock-up commitments can be quite costly for early investors particularly towards the end of a hot issue market

Electrochemical pressure impedance spectroscopy for polymer electrolyte membrane fuel cells: Signal interpretation

Electrochemical pressure impedance spectroscopy (EPIS) is an emerging tool for the diagnosis of polymer electrolyte membrane fuel cells (PEMFC). It is based on analyzing the frequency response of the cell voltage with respect to an excitation of the gas-phase pressure. Several experimental studies in the past decade have shown the complexity of EPIS signals, and so far there is no agreement on the interpretation of EPIS features. The present study contributes to shed light into the physicochemical origin of EPIS features, by using a combination of pseudo-two-dimensional modeling and analytical interpretation. Using static simulations, the contributions of cathode equilibrium potential, cathode overpotential, and membrane resistance on the quasi-static EPIS response are quantified. Using model reduction, the EPIS responses of individual dynamic processes are predicted and compared to the response of the full model. We show that the EPIS signal of the PEMFC studied here is dominated by the humidifier. The signal is further analyzed by using transfer functions between various internal cell states and the outlet pressure excitation. We show that the EPIS response of the humidifier is caused by an oscillating oxygen molar fraction due to an oscillating mass flow rate

Stock Market Reactions to Financing and Payment Decisions for European Mergers and Acquisitions

Aim: We analyze stock market reactions to merger and acquisition announcements for firms in Europe and contribute to the literature by providing empirical evidence how the decisions with respect to alternative financing sources (equity or debt) and the methods of payment (cash or stock) affect the magnitude of the valuation effects.   Research design: An event study methodology is applied to 717 M&A transactions. We analyze the size of the cumulative abnormal returns using the financing sources and payment methods and other variables as the relevant determinants.   Findings: The cumulative abnormal results suggest that target shareholders and bidder shareholders in private deals benefit from mergers and acquisitions. The effect found is centered around the announcement date, making our findings consistent with market efficiency. Debt financed deals outperform equity financed deals and cash paid M&A outperform stock paid M&As, due to information asymmetry, signaling and agency effects.   Originality: This study adds to our understanding of the relevance of the financing sources and the payment methods for mergers and acquisitions in Europe.   Implications: This study may help practitioners to better assess the valuation effects of alternative financing sources and payment methods when acquiring other firms.     JEL: G32, G3

The Design and Success of Stock Options Plans for New Economy Firms in Germany

In recent years, the use of stock options as an incentive compensation scheme has evolved to be one of the most debated topics in the finance literature as well as in the corporate world. The investigations into the option granting practices at a number of U.S. firms, which were accused of fraudulent backdating options, as well as the compensation schemes of top bankers and other top executives during the current financial crisis, heated up this debate even more. Our study contributes to the empirical research on stock option plans (SOPs) by focusing on start-up or \u27new economy\u27 firms in Germany. For the 329 firms that went public at the \u27Neuer Markt\u27, a special stock market segment for young growth companies in Germany, we find a high popularity of stock options in that more than 90% of all IPOs implemented at least one stock option plan (SOP) at the time of the IPO or later on. These SOPs were broad-based and included rank and file employees as the options\u27 recipients. Our empirical results reveal--at least with hindsight--that accepting stock options as part of an overall salary package did not pay off financially for employees during that time period. Furthermore, the success and performance of the investigated SOPs were influenced by their statutory design and the succession of three different lock-up periods. These made a profitable option exercise for employees very difficult. Our findings question the rationale behind the design, introduction, and implementation of SOPs during the time of the \u27Neuer Markt\u27 in Germany at least from the perspective of non-executive employees