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The pricing of European non-performing real estate loan portfolios: evidence on stock market evaluation of complex asset sales

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  • Manz, Florian
  • Müller, Birgit
  • Schiereck, Dirk

Abstract

Recent empirical evidence raises doubt about the ability of financial market participants to generate information efficient valuations for capital market instruments whose cash flows are related to residual claims and dependent on real estate income. We contribute to this literature with the examination of value implications of non-performing loan (NPL) divestitures in the banking industry during the period 2012–2018. In a first step, we provide descriptive statistics of the European NPL market, which lacks transparency and publicly available basic information on portfolio size and components. We then analyze wealth effects of distressed loan sale announcements for a uniquely large transaction database with 317 NPL deals, which is largely driven by real estate collateral. Our results show positive stock market reactions for vendor banks following NPL divestitures that tend to be driven by real estate collateral and a size effect.

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  • Manz, Florian & Müller, Birgit & Schiereck, Dirk, 2024. "The pricing of European non-performing real estate loan portfolios: evidence on stock market evaluation of complex asset sales," Publications of Darmstadt Technical University, Institute for Business Studies (BWL) 144672, Darmstadt Technical University, Department of Business Administration, Economics and Law, Institute for Business Studies (BWL).
    • Handle: RePEc:dar:wpaper:144672
    DOI: 10.1007/s11573-021-01060-x
    Note: for complete metadata visit http://tubiblio.ulb.tu-darmstadt.de/144672/
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    References listed on IDEAS

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    1. Brown, Stephen J. & Warner, Jerold B., 1980. "Measuring security price performance," Journal of Financial Economics, Elsevier, vol. 8(3), pages 205-258, September.
    2. Boehmer, Ekkehart & Masumeci, Jim & Poulsen, Annette B., 1991. "Event-study methodology under conditions of event-induced variance," Journal of Financial Economics, Elsevier, vol. 30(2), pages 253-272, December.
    3. Charles J. Corrado, 2011. "Event studies: A methodology review," Accounting and Finance, Accounting and Finance Association of Australia and New Zealand, vol. 51(1), pages 207-234, March.
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