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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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  • Florian Manz

    (Technical University of Darmstadt)

  • Birgit Müller

    (Technical University of Darmstadt
    Technical University of Munich (TUM))

  • Dirk Schiereck

    (Technical University of Darmstadt)

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.

Suggested Citation

  • Florian Manz & Birgit Müller & Dirk Schiereck, 2020. "The pricing of European non-performing real estate loan portfolios: evidence on stock market evaluation of complex asset sales," Journal of Business Economics, Springer, vol. 90(7), pages 1087-1120, August.
    • Handle: RePEc:spr:jbecon:v:90:y:2020:i:7:d:10.1007_s11573-020-00983-1
    DOI: 10.1007/s11573-020-00983-1
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    Cited by:

    1. Wolfgang Breuer & Bertram I. Steininger, 2020. "Recent trends in real estate research: a comparison of recent working papers and publications using machine learning algorithms," Journal of Business Economics, Springer, vol. 90(7), pages 963-974, August.
    2. Alexandra Z. Marouli & Eugenia N. Giannini & Yannis D. Caloghirou, 2023. "A Non-Performing Loans (NPLs) Portfolio Pricing Model Based on Recovery Performance: The Case of Greece," Risks, MDPI, vol. 11(5), pages 1-17, May.

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    More about this item

    Keywords

    Non-performing loans; Distressed real estate; Restructuring; Banking sector; Real estate finance;
    All these keywords.

    JEL classification:

    • G14 - Financial Economics - - General Financial Markets - - - Information and Market Efficiency; Event Studies; Insider Trading
    • G21 - Financial Economics - - Financial Institutions and Services - - - Banks; Other Depository Institutions; Micro Finance Institutions; Mortgages
    • R32 - Urban, Rural, Regional, Real Estate, and Transportation Economics - - Real Estate Markets, Spatial Production Analysis, and Firm Location - - - Other Spatial Production and Pricing Analysis

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