Shareholder Value Creators and Shareholder Value Destroyers in Europe. Year 2002

Abstract

2002 was a bad year for the shareholders of the companies in the Euro Stoxx 50: the shareholder value destruction of the companies in the Euro Stoxx 50 was Euro 958,968 million. In 2002 only Eni created value (Euro 3,374 million). The remaining 49 companies destroyed value and had negative returns. Alcatel had the lowest shareholder return in 2002 (-77.9%). Shareholder value destruction in the 3-year period 2000-2002 Euro was 1.9 trillion. The market value of the 50 companies was Euro 1.42 trillion in 2002, and Euro 2.24 trillion in 2001, and Euro 2.75 trillion in 2001. We also calculate the created shareholder value of the 50 companies during the six-year period 1997-2002. Nokia was the top shareholder value creator and Allianz the top shareholder value destroyer during the six-year period. We find a very weak relationship between return and size. A portfolio long in the companies that entered the index and short in the companies that abandoned the index had on average a 10% return in the 16 days prior to the index recomposition and a -6% return in the 12 days after the index recomposition. In 2002, the Euro Stoxx 50 was much more volatile than the S&P 500 or the Dow Jones.

Keywords: shareholder value creation, created shareholder value, equity market value, shareholder value added, shareholder return, required return to equity

JEL Classification: G12, G31, M21