Underpricing effect in Poland, Hungary and Czech Republic

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

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.