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

Calum A.J. Middleton (School of Management, University of St Andrews, St Andrews, Scotland, UK)
Suzanne G.M. Fifield (School of Accounting and Finance, University of Dundee, Dundee, Scotland, UK)
David M. Power (School of Accounting and Finance, University of Dundee, Dundee, Scotland, UK)

Studies in Economics and Finance

ISSN: 1086-7376

Article publication date: 13 March 2007

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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

Citation

Middleton, C.A.J., Fifield, S.G.M. and Power, D.M. (2007), "Investment in Central and Eastern European equities: An investigation of the practices and viewpoints of practitioners", Studies in Economics and Finance, Vol. 24 No. 1, pp. 13-31. https://doi.org/10.1108/10867370710737364

Publisher

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Emerald Group Publishing Limited

Copyright © 2007, Emerald Group Publishing Limited

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