Abstract—The large variances in the share price reactions to the 2007 credit crunch appear to depend on the geographical region, size and financial performance of companies. In order to identify commonalities and idiosyncrasies in these influences, we perform cluster analysis of companies’ share price performance and financial and structural data as of 31 December 2008 in comparison to the start of the credit crunch in July 2007 on a sample of 705 listed companies from 45 European countries. Employing k-means clustering, we recognise 8 distinct clusters, one of these comprising companies, which gained in stock prices under the credit crunch. Most of the “winners” tend to be large companies in the EU 15 old member states, showing a relatively low ex ante P/E ratio, high profit margin and moderate return on assets. However, companies having experienced biggest losses in share prices are the ones with highest ex ante P/E ratios and high return on assets, demonstrating a clear contrast between the overly optimistic expectations of shareholders and companies’ actual ability to increase value prior to the credit crunch. Interestingly, belonging to a certain industry does not seem to have been a key driver of companies’ stock price reactions to the credit crunch.
Index Terms—Stock prices, credit crunch, cluster analysis.
M. Männiste is PhD student in Financial Economics at the Department of Economics at Tallinn University of Technology, Ehitajate tee 5, Tallinn 19086, Estonia (e-mail: email@example.com).
A. Hazak is Senior Researcher at the Department of Economics at Tallinn University of Technology, Ehitajate tee 5, Tallinn 19086, Estonia (e-mail: firstname.lastname@example.org).
E. Listra is Professor of Finance and Banking at the Department of Economics at Tallinn University of Technology, Ehitajate tee 5, Tallinn 19086, Estonia (e-mail: email@example.com).
Cite: Mari Männiste, Aaro Hazak, and Enn Listra , "European Listed Companies’ Share Price Reactions to Global Credit Crunch: Typology of Winners and Losers ," International Journal of Trade, Economics and Fiance vol. 2, no. 6, pp. 478-483, 2011.