CAPITAL MARKET COMMUNICATION IN CENTRAL AND EASTERN EUROPE – COMPARATIVE STUDIES ON REPORTING BEHAVIOUR ABOUT PUBLIC PRIVATE PARTNERSHIPS UNIVERSITY OF VIENNA Faculty of Business, Economics and Statistics Bruennerstr. 72 A – 1210 Vienna Coreteam: Michaela Schaffhauser-Linzatti Regina Michalski-Karl Silvia Maria Pernsteiner ECONOMIC AND MONETARY UNION: 10 YEARS OF SUCCESS? November 27 th – 28 th, 2008 Mendel University, Brno, Czech Republic Presentation: Franziska Öllinger

RESEARCH QUESTIONS WITHIN CENTRAL AND EASTERN EUROPE (CEE) increasing importance of public private partnership (PPP) increasing importance of transparent business reporting  Case study with focus on the reporting behaviour of private partners 1. Is reporting on PPP mandatory for listed companies? 2. In case reporting is not mandatory, do these companies inform their stakeholders about their PPP-activities? If so, in which way do they report on their participation? CAPITAL MARKET COMMUNICATION in CEE – REPORTING BEHAVIOUR ABOUT PPP Franziska OELLINGER 2

CEE SAMPLE CEE COUNTRIES Austria Bulgaria Czech Republic Croatia Poland Russia Rumania Slovakia Slovenia Ukraine CEE FIRMS all companies listed at the corresponding CEE Stock Exchanges YEARS prestudy: 2005 full sample: 2006 time frame of the study: May to December 2008 CAPITAL MARKET COMMUNICATION in CEE – REPORTING BEHAVIOUR ABOUT PPP Franziska OELLINGER 3

1. MANDATORY REPORTING ON PPP? No sample CEE country had a law by-law in force that prescribed mandatory reporting on PPP in annual reports of listed companies. CAPITAL MARKET COMMUNICATION in CEE – REPORTING BEHAVIOUR ABOUT PPP Franziska OELLINGER 4

2. VOLUNTARY REPORTING ON PPP? sample analysis not yet finished so far, in NO country companies reported comprehensively on PPP most interesting results in the Austrian pre-study 2005 basis of the following empirical examination CAPITAL MARKET COMMUNICATION in CEE – REPORTING BEHAVIOUR ABOUT PPP Franziska OELLINGER 5

Annual Report according Austrian UGB reporting duties regulated in Unternehmensgesetzbuch (UGB) legally demanded parts of the annual report – balance sheet – profit and loss account – notes – management report development and position of the business financial key performance indicators non-financial key performance indicators post balance sheet date events of particular importance likely future development of the business principal risks and uncertainties activities in the field of research and development CAPITAL MARKET COMMUNICATION in CEE – REPORTING BEHAVIOUR ABOUT PPP Franziska OELLINGER 6

SAMPLE AND DATA SOURCE SAMPLE: all 101 companies listed at the Austrian Stock Exchange within the business year 2005 (deadline ) – in all market segments – with all types of securities – headquarters Austria: 67 companies abroad: 8 companies – 26 firms had to be excluded because of their IPO, delisting or insolvency within the investigation period DATA SOURCE: electronic version of the sample’s annual reports CAPITAL MARKET COMMUNICATION in CEE – REPORTING BEHAVIOUR ABOUT PPP Franziska OELLINGER 7

RESEARCH DESIGN I.TWO-STEP FLOW OF QUANTITATIVE RESEARCH: 1. DIRECT SEARCH by 20 keywords that proof the existence of a PPP 2. INDIRECT SEARCH by further 37 keywords that might indicate a PPP  quantitative-descriptive analysis with comparison - of hits per company, per origin country - of hits by industry (according to the OENACE nomenclatures) - of hits by category of the keyword-selection II. QUALITATIVE ANALYSIS: hermeneutic case study on companies identified as private partner in a PPP-project with the methodology of a CONTENT ANALYSIS CAPITAL MARKET COMMUNICATION in CEE – REPORTING BEHAVIOUR ABOUT PPP Franziska OELLINGER 8

RESULTS – Overview NO HITS (3%) HITS FROM SEARCH BY DIRECT KEYWORDS (7%) HITS FROM SEARCH BY INDIRECT KEYWORDS (90%) CAPITAL MARKET COMMUNICATION in CEE – REPORTING BEHAVIOUR ABOUT PPP Franziska OELLINGER 9

KEYWORDS FOR DIRECT SEARCH (Special kinds of) PPP, synonyms and their short forms: - Public Private Partnership, PPP - Private Financial Initiative, PFI - Public Social Private Partnership, PSPP Types and models of cooperation: - BLOT, BOO, BOOT, BOR, BOT, BROT, BTO, DBFO, DCMF, LDO, MOO, MOT, ROD, ROT HITS: 5 Austrian groups (5% of the sample): - 3 firms in banking industry - each 1 in the construction industry and the energy sector CAPITAL MARKET COMMUNICATION in CEE – REPORTING BEHAVIOUR ABOUT PPP Franziska OELLINGER 10

BANK AUSTRIA – CREDITANSTALT - banking industry: 31,792 employees; 158,879 €m total assets - “Public Private Partnership“ and “PPP“ mentioned twice: ”Public sector customers increasingly use the public private partnership expertise which we have gained in and outside Austria as an alternative to standard solutions.” Chapter “Development of the Bank in 2005”, subchapter “Management Report of the Group (with outlook)”, p no further description of the number or kind of PPPs involved CAPITAL MARKET COMMUNICATION in CEE – REPORTING BEHAVIOUR ABOUT PPP Franziska OELLINGER 11

ALLGEMEINE BAUGESELLSCHAFT – A. PORR AG - construction industry: 10,241 employees, 1,527.6 €m - “Public Private Partnership“ and “PPP“ mentioned in 6 paragraphs: “Over the coming years, major infrastructure projects will increasingly be financed by means of public-private partnerships and franchise models. We have already built up a highly impressive stock of references for this high-potential new business model on the basis of small-scale projects at home and abroad. In the PPP project concerning the M6 motorway between Budapest and Dunaùjvaros, the PORR Group defeated strong international competition […]. The €500 million project will be completed in just 18 months under the terms of a joint venture; the consortium will be responsible for upkeep over the subsequent 20 years and 6 months.” “We Finance the Fast Roads to the Future. Innovation means Finding new Faces to Existing Markets”, pp. 51, 52. CAPITAL MARKET COMMUNICATION in CEE – REPORTING BEHAVIOUR ABOUT PPP Franziska OELLINGER 12

EVN - energy industry: 9,973 employees; 5,845.8 €m total assets - “BOOT” model for athermal waste water treatment mentioned 7 times: “Within the framework of a BOOT model, WTE will operate the facility until the year 2019, when it will be handed over to the municipal authorities in Moscow. The heat produced in Moscow in the course of the waste incineration process will be converted into electricity and fed into the public district heating network.” Chapter segment reporting, “BOOT”, “International Business”, pp. 102, 103. CAPITAL MARKET COMMUNICATION in CEE – REPORTING BEHAVIOUR ABOUT PPP Franziska OELLINGER 13

ÖSTERREICHISCHE VOLKSBANKEN-AG - banking industry: 5,482 employees, 54,800 €mio total assets - “Public-Private Partnership” mentioned once: ”Also in the field of project finance, which also includes Public- Private-Partnerships together with industrial projects and projects concerning alternative energy, the business activities could be considerably enlarged.” (translation) Chapter “strategic segments, enterprises” p no further description of the number or kind of PPPs involved CAPITAL MARKET COMMUNICATION in CEE – REPORTING BEHAVIOUR ABOUT PPP Franziska OELLINGER 14

RAIFFEISEN LANDESBANK OBERÖSTERREICH banking industry: 1,255 employees, 19,320 €m total assets mentions PPP in 7 paragraphs “For many years, Raiffeisenlandesbank Oberösterreich has successfully implemented special financing and Private Public Partnership models. PPP models represent a proven method of realising future-oriented, costintensive infrastructure measures for the development of important tourism operations, health ser- vice projects and communal facilities and therefore constitute a major contribution to the securing of domestic value added.” Chapter “customer services, key account services” p. 22. The regional bank attends (and/or finances) a number of PPP projects, however they are not comprehensively mentioned (“among others,…”) within the annual report. CAPITAL MARKET COMMUNICATION in CEE – REPORTING BEHAVIOUR ABOUT PPP Franziska OELLINGER 15

KEYWORDS FOR INDIRECT SEARCH Derivation of 37 keywords from the “Green Paper on PPP and Community Law on Public Contracts and Concessions”, 2004: I CONTRACTING PARTNERS municipal, commune, state, public authority, public / private partner, private investor II DESCRIPTION OF PARTNERSHIP utility supply contract, alliance, project partner, cooperation, relationship, arrangement, strategic partnership, private initiative III FORM OF COOPERATION funding, construction, renovation, public administration, maintenance, public provision, leasing IV SECTORS OF COOPERATION infrastructure, traffic, education, research promotion, waste management, water supply, power supply, hospital, public health V PPP-CHARACTERISTICS long-term contract, private sector, public interest, public funds, distribution of risks CAPITAL MARKET COMMUNICATION in CEE – REPORTING BEHAVIOUR ABOUT PPP Franziska OELLINGER 16

HITS AND CATEGORIES CAPITAL MARKET COMMUNICATION in CEE – REPORTING BEHAVIOUR ABOUT PPP Franziska OELLINGER 17

HITS AND KEYWORDS * selection of main keywords CAPITAL MARKET COMMUNICATION in CEE – REPORTING BEHAVIOUR ABOUT PPP Franziska OELLINGER 18

SUMMARY only little and predominantly unspecific information on PPP within the analysed annual reports Why do companies publish information on PPP only reticently? - several risks an uncertainties for the private partner - Investor Relations and shareholder revenues - no legal demand on reporting on PPP open question How to identify companies with PPP activities listed at a Stock Exchange? CAPITAL MARKET COMMUNICATION in CEE – REPORTING BEHAVIOUR ABOUT PPP Franziska OELLINGER 19

FUTURE RESEARCH finalizing CEE analysis refining search through extension and combination of keywords correlations among keywords and statistic analyses comparison of PPP-reporting behaviour over years CAPITAL MARKET COMMUNICATION in CEE – REPORTING BEHAVIOUR ABOUT PPP Franziska OELLINGER 20