Investment in Central and Eastern European equities: an investigation of the practices and viewpoints of practitioners

Calum A. J. Middleton, Suzanne G. M. Fifield, David M. Power

    Research output: Contribution to journalArticle

    11 Citations (Scopus)

    Abstract

    Purpose – The purpose of this paper is to examine the issues faced by institutional investors looking to invest in the Central and Eastern European (CEE) region. In particular, the paper seeks to ascertain the views of practitioners on the reasons for undertaking CEE investment, the structures of their investment processes for the CEE region, the barriers to CEE investment, and the future of the CEE region. Design/methodology/approach – A series of semi-structured interviews was conducted with institutional investors who had substantial knowledge and experience of investing in the CEE region. Findings – The findings indicated that funds followed a bottom-up approach whereby they researched company fundamentals and then applied a macroeconomic overview in their decision. The risks considered were not those frequently discussed in the current literature. For example, while currency risk and political risk were not seen as problematic, interviewees were concerned with liquidity problems and corporate governance issues. Finally, investors thought that the economic growth of the CEE region, together with its convergence with the EU, would create a more attractive investment environment than that available in other emerging market regions. Originality/value – The paper addresses the more qualitative aspects of CEE investment decisions, such as perceptions about the risks of acquiring shares in CEE firms, by analysing practitioner perspectives on equity investment in the region. This qualitative approach facilitates an investigation of issues which cannot be captured in quantitative analyses.
    Original languageEnglish
    Pages (from-to)13-31
    Number of pages19
    JournalStudies in Economics and Finance
    Volume24
    Issue number1
    DOIs
    Publication statusPublished - 2007

    Fingerprint

    Equity
    European regions
    Institutional investors
    Liquidity
    Investors
    Investment decision
    Bottom-up
    Economic growth
    Currency risk
    European firms
    Political risk
    Design methodology
    Investing
    Corporate governance
    Qualitative approaches
    Emerging markets
    Structured interview
    Macroeconomics
    Investment process

    Keywords

    • International investment
    • Eastern Europe
    • Central Europe

    Cite this

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    abstract = "Purpose – The purpose of this paper is to examine the issues faced by institutional investors looking to invest in the Central and Eastern European (CEE) region. In particular, the paper seeks to ascertain the views of practitioners on the reasons for undertaking CEE investment, the structures of their investment processes for the CEE region, the barriers to CEE investment, and the future of the CEE region. Design/methodology/approach – A series of semi-structured interviews was conducted with institutional investors who had substantial knowledge and experience of investing in the CEE region. Findings – The findings indicated that funds followed a bottom-up approach whereby they researched company fundamentals and then applied a macroeconomic overview in their decision. The risks considered were not those frequently discussed in the current literature. For example, while currency risk and political risk were not seen as problematic, interviewees were concerned with liquidity problems and corporate governance issues. Finally, investors thought that the economic growth of the CEE region, together with its convergence with the EU, would create a more attractive investment environment than that available in other emerging market regions. Originality/value – The paper addresses the more qualitative aspects of CEE investment decisions, such as perceptions about the risks of acquiring shares in CEE firms, by analysing practitioner perspectives on equity investment in the region. This qualitative approach facilitates an investigation of issues which cannot be captured in quantitative analyses.",
    keywords = "International investment, Eastern Europe, Central Europe",
    author = "Middleton, {Calum A. J.} and Fifield, {Suzanne G. M.} and Power, {David M.}",
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    AB - Purpose – The purpose of this paper is to examine the issues faced by institutional investors looking to invest in the Central and Eastern European (CEE) region. In particular, the paper seeks to ascertain the views of practitioners on the reasons for undertaking CEE investment, the structures of their investment processes for the CEE region, the barriers to CEE investment, and the future of the CEE region. Design/methodology/approach – A series of semi-structured interviews was conducted with institutional investors who had substantial knowledge and experience of investing in the CEE region. Findings – The findings indicated that funds followed a bottom-up approach whereby they researched company fundamentals and then applied a macroeconomic overview in their decision. The risks considered were not those frequently discussed in the current literature. For example, while currency risk and political risk were not seen as problematic, interviewees were concerned with liquidity problems and corporate governance issues. Finally, investors thought that the economic growth of the CEE region, together with its convergence with the EU, would create a more attractive investment environment than that available in other emerging market regions. Originality/value – The paper addresses the more qualitative aspects of CEE investment decisions, such as perceptions about the risks of acquiring shares in CEE firms, by analysing practitioner perspectives on equity investment in the region. This qualitative approach facilitates an investigation of issues which cannot be captured in quantitative analyses.

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