Was RASDAQ Doomed from the Start? A Preliminary Investigation

Abstract

The re-opening of Bucharest Stock Exchange in November 1995 and the start of RASDAQ in October/ November 1996 were both prompted by the Mass Privatization Program results. RASDAQ was established as an alternative equity exchange where the bulk of the 6,000 privatized companies should be listed, according to the Romanian regulations related to privatization. The present paper will present a survey over RASDAQ covering the period since its start in November 1996 until the end of December 2013. It will also try to answer, in the end, what RASDAQ future might be taking into consideration the survey findings in combination with empirical investigations regarding the influence of Bucharest Stock Exchange over RASDAQ, the presence/absence of anomalies and the quality of listed companies. The findings implies that RASDAQ was rather a market preferred by those investors who were involved in the ownership concentration process and was only secondary considered as an alternative for portfolio investments. For the current period, the free float of a company, the transparency of the respective company and the ownership structure seems to be factors that play a role in the trading decision of portfolio investors. The findings also support the idea that despite the good intentions of offering a fair a transparent trading platform for million of shareholders, the combination of bad decisions and relax regulation created the mix of factors that eroded potential investors’ confidence in RASDAQ. The tainted image gained during the first period of its existence followed RASDAQ until the present with the unavoidable consequences of investors’ interest in continuous decline.