The German Financial Market : An Empirical investigation into the Natural Stackelberg situation and initial public offering

Abstract

Chapter two examines empirically which kind of competition serves the German Financial Market best.  Empirical results from unique time series data sets suggest three important findings:  First, trades offered in the stock exchanges under investigation can be seen as differentiated goods.  Second, playing a sequential game is most beneficial for all stock exchanges in Germany, and third, given the facts, the degree of information revelation is greater in the case of the Frankfurt Stock Exchange.  Given a huge gap in existing literature I contribute in this paper by applying industrial organization (IO) theory to the securities industry and testing it by the mentioned data sets which have not been used in any empirical investigation so far.  As not all desired data was available, I constructed so-called “proxies” representing the missing data sets.

Chapter three examines the listing decision of German initial public offerings (IPOs).  Results from cross-sectional data of the German financial market suggest 5 important findings:  First, smaller and riskier firms list in a dealer market.  Second, younger firms are more likely to list in a dealer market.  Third, IPO listings weakly cluster by industry, i.e., software and technology firms are more likely to list on the Neuer Markt segment than other firms.  Fourth, follow-on strategies and other included qualitative variables do not play an important part in the listing decision of German IPOs, the fifth, the German dealer market was created not as a competitor for the auction market but to provide market maker sponsorship.  I contribute by defining qualitative and quantitative variables that describe the German market best, receiving thus a unique data set and using it for empirical investigation.

Chapter four investigates different cost components IPOs are faced with.  There are three findings: First, in the dealer market benefits are higher than costs for young and small IPOs.  Second, there exists no real competition in the considered segments, and third, well known IPOs will be guided straight into the auction market, the 1^st market segment.  I contribute again by defining variables that describe the German Financial Market in analysing financial statements, balance sheets, profit and loss accounts, etc., constructing unique data sets which are non-existing so far.  Different variables to the ones used in Chapter Three are the different Cost Components, Underwriter Market Share, Venture Backed Capital, and dummies called 1^st Segment and NM.

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