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Zeitschrift für Energiewirtschaft
Published in: Zeitschrift für Energiewirtschaft 3/2016

28-06-2016

The Solar Shakeout – Capital Market Reactions to Bankruptcy Announcements in the German Solar Industry

Authors: Thomas Kaspereit, Prof. Kerstin Lopatta

Published in: Zeitschrift für Energiewirtschaft | Issue 3/2016

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Abstract

This paper investigates how bankruptcy announcements in the German solar industry affect the stock market returns of announcing firms and their competitors. We show that German solar firms experience negative capital market reactions to their own bankruptcy announcements and to the announcements of their competitors. Cross-sectional analysis reveals that these negative information externalities are magnified by higher leverage. Further analysis also indicates that these negative information externalities are valuable predictors in short-term default probability models.
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Appendix
Available only for authorised users
Footnotes
1
Gesetz für den Vorrang Erneuerbarer Energien (ErneuerbareEnergien-Gesetz – EEG) sowie zur Änderung des Energiewirtschaftsgesetzes und des Mineralölsteuergesetzes from 23 March 2000 (BGBl. I, 305).
 
2
Datasource: Bundesministerium für Wirtschaft und Energie (Federal Ministry for Economic Affairs and Energy 2014).
 
3
Gesetz zur Neuregelung des Rechts im Bereich der Erneuerbaren Energien from 21 July 2004 (BGBl. I, 1918).
 
4
Gesetz zur Neuregelung des Rechts der Erneuerbaren Energien im Strombereich und zur Änderung damit zusammenhängender Vorschriften from 25 October 2008 (BGBl. I, 2074).
 
5
E. g., Erneuerbare-Energien-Gesetz from 25 October 2008 (BGBl. I, 2074), lastly amended by Article 1 of Erstes Gesetzes zur Änderung des Erneuerbare Energien-Gesetzes from 11 August 2010 (BGBl. I, 1170).
 
6
According to rough estimates from Bloomberg analysts, production costs for solar panels have decreased from around 5 US-dollar per Watt in 2000 to around 0.50 US-dollar per Watt in 2014 (Bloomberg 2014).
 
7
Using SIC codes has proven inconvenient since there is no unique code for solar firms and a pre-analysis has shown that, despite most solar firms as defined by our criteria being classified under 3,674, “Semiconductors and Related Devices”, many others are spread across several SIC codes such as 4,991 “Cogeneration Services & Small Power Producers” and 8,711 “Engineering Services”.
 
8
The daily movements of prices, i. e., returns, in this study are quantified by their relative change to the price at the end of the previous day while assuming reinvestment of any cash distributions to shareholders. All returns in this study are defined as continuously compounded returns calculated as differences between the natural logarithms of daily closing prices.
 
9
We merge our database of bankruptcy announcements with accounting data from Compustat based on event dates and dates of fiscal year end. In particular, we merge event dates with the next lower available fiscal year end of sample firms. If this accounting data is older than 735 days, we reset it to “missing” and exclude this observation from the analysis.
 
10
For a critical review of the marginal benefit of the Herfindahl-Hirschman Index over simpler concentration measures, see Kwoka (1985) and Bailey and Boyle (1971).
 
11
(Jorion and Zhang 2010: 696), for instance, report adjusted R‑squareds between 2.46 % and 6.17 % in a cross-sectional analysis with similar explanatory variables. In Jorion and Zhang (2009: 2072–2074) the adjusted R‑squareds range between 2.64 % and 25.84 %.
 
12
The unconditional ratio of probability of defaut to probability of non-default is 0.1613/(1-0.1613) ≈ 0.1923. A decrease in this ratio by exp(−0.04) minus 1, which is −0.0392 leads to 0.1923 − 0.0392 ≈ 0.1531. These implies that the new probability of default equals 0.1531/(1 + 0.1531) ≈ 0.1328.
 
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Metadata
Title
The Solar Shakeout – Capital Market Reactions to Bankruptcy Announcements in the German Solar Industry
Authors
Thomas Kaspereit
Prof. Kerstin Lopatta
Publication date
28-06-2016
Publisher
Springer Fachmedien Wiesbaden
Published in
Zeitschrift für Energiewirtschaft / Issue 3/2016
Print ISSN: 0343-5377
Electronic ISSN: 1866-2765
DOI
https://doi.org/10.1007/s12398-016-0178-3

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