Capital Market Review of Romania

Annex A. Methodology for data collection and classification

A. Company financial and ownership information

The information presented in Chapter 2 is mainly based on the OECD ORBIS Corporate Finance database. The extract of information presented in Chapter 2 includes financial statement and ownership information for non-financial companies between 2005 and 2018.

Company categories construction

Chapter 2 shows the following four non-financial firm categories: Category 1 “Listed companies”, Category 2 “Large unlisted companies”, Category 3 “Small and mid-sized companies part of a group”, and Category 4 “Independent small and mid-sized companies”. The construction of the company categories is based on the ownership, industry, legal information and financial information tables.

The procedure starts by identifying all listed and unlisted companies with assets over USD 100 million in the entire ORBIS universe. Non-financial listed companies are classified immediately as Category 1 and large unlisted non-financial companies as Category 2. For these groups, the consolidated financial statements are used, if available.

The following steps identify the countries of interest and uses their ownership country year tables to identify companies in Category 3 and Category 4. ORBIS provides many records of owners at different points in time from different sources. Two criteria are used to clean the ownership information and to be left out with only one record for each owner firm year observation: the largest owner is kept and the latest information is prioritised. The largest owner can be either the global ultimate owner at 50%, the global ultimate owner at 25%, or the largest direct owner with over 25% holdings. Once the sample has a unique owner firm year record, owners are classified as corporations or natural persons.

Using the ownership records generated in the previous step, the routine starts by identifying the subsidiaries of the listed and large unlisted companies. Three types of companies are identified: 1) domestic subsidiaries with a local parent, 2) domestic subsidiaries with a foreign parent, and 3) companies controlled by a person. Some companies that are classified as subsidiaries in this step were already identified as large unlisted companies at the beginning. In these cases, since the subsidiary was already consolidated, its data were not used to avoid duplications. The domestic subsidiaries with a local parent in Category 1 or 2, or with foreign parents Category 1 or 2 are classified as Category 3. Please note that this category includes the non-financial domestic subsidiaries of financial domestic parent and foreign parents as these parents are excluded as they do not meet the industry requirement or because they are not incorporated in the domestic market under analysis. The companies where the largest owner is a person (over 25% ownership) are classified as Category 4.

Economy wide calculations take into account the ownership structure of companies and avoid considering companies that are already consolidated in the accounts of domestic non-financial parent companies. Thus, economy wide calculations include companies from Category 1, Category 2, Category 4, companies without ownership information, and companies from Category 3 that had a foreign parent or a financial domestic parent.

Financial information cleaning

The company category classification described in the previous section also incorporates different types of financial reporting (consolidated and unconsolidated reports). Large companies in the universe commonly report consolidated financial statements as well as unconsolidated financial statements. For the listed and large unlisted non-financial company categories, consolidated accounts are considered, if available. For the remaining categories, unconsolidated financial statements are used.

The raw financial dataset contains several firm year observations when a company has multiple consolidation codes or it reports for different purposes. To construct a panel with a unique firm year observation, the following steps are applied:

1. Financial companies are excluded.

2. The fiscal year is recorded as the previous calendar year of the closing date whenever the closing date of the financial statement is before 30 June.

3. Financial statements covering a 12‑month period are used, preferably.

4. When multiple observations within the same year exist, accounts with closing dates closer to year‑end are preferred to accounts with older closing dates.

5. Published annual reports are preferred to local registry filings. Local Registry filings are preferred to unknown filing types.

6. Accounts using IFRS are preferred to those using GAAP, accounts using GAAP are preferred to those using unknown accounting practices.

7. For companies with multiple consolidation codes, the following criteria apply: for companies that release consolidated financial statements, C1 is preferred when both C1 and C2 exist; for companies that release unconsolidated statements the observation from annual reports are preferred over others.

8. Financial information is adjusted by annual EUR Consumer Price Index changes and information is reported in 2019 constant million EUR.

9. Companies with at least one observation showing negative assets or negative fixed assets are dropped from the sample.

10. Companies with equal or less than 10 employees are dropped from the sample. When employee number is not available companies with total assets below EUR 35 000 are dropped from the sample.

11. Financial statement information is winsorised at 1% for both tails within companies’ categories.

12. In the case that there are single year gaps in the financial data, these are populated by interpolation using the average value of the preceding and the succeeding year for major items. Sub items are then calculated using accounting identities. Such interpolation is reserved for single year gaps, and is not applied for data gaps with two or more years.

The OECD ORBIS Corporate Finance uses the 1 digit SIC industry classification.

Table A.1. ORBIS industry classification

Standard Industrial Classification (SIC)
Agriculture, Forestry and Fishing
Mining
Construction
Manufacturing
Transportation, Communications, Electric, Gas and Sanitary service

B. Public equity data

The information on initial public offering (IPOs) and secondary public offerings (SPOs) presented in Chapter 4 is based on transaction and/or firm level data gathered from several financial databases, such as Thomson Reuters Eikon, Thomson Reuters Datastream, FactSet and Bloomberg.

Considerable resources have been committed to ensuring the consistency and quality of the dataset. Different data sources are checked against each other and, whenever necessary, the information is also controlled against original sources, including regulator, stock exchange and company websites and financial statements.

Country coverage and classification

The dataset includes information about all initial public offerings (IPOs) and secondary public offerings (SPOs or follow on offerings) by financial and non-financial companies for six European economies (Romania, Austria, the Czech Republic, Germany, Hungary and Poland) for the period from January 1995 to December 2019.

All public equity listings following an IPO, including the first time listings on an exchange other than the primary exchange, are classified as a SPO. If a company is listed in more than one exchange within 180 days, those transactions are consolidated under one IPO. The country breakdown is carried out based on the domicile country of the issuer. In the dataset, the country of issue classification is also made based on the stock exchange location of the issuer.

It is possible that a company becomes listed in more than one country when going public. The financial databases record a dual listing as multiple transactions for each country where the company is listed. However, there is also a significant number of cases where dual listings are reported as one transaction only based on the primary market of the listing. For this reason, the country breakdown based on the stock exchange is currently carried out based on the primary market of the issuer. Going forward, the objective is to allocate proceeds from an IPO to respective markets where the issuance is listed at the same time.

Currency conversion and inflation adjustment

The IPO and SPO data, and related financial statement data, such as total assets before the offering, are collected on a deal basis via commercial databases in current USD values. The information is aggregated at the annual frequency and, in some tables, presented at the year industry level. Issuance amounts initially collected in USD were adjusted by US Consumer Price Index (CPI) and finally converted to 2019 EUR using the average exchange rate EUR/USD for 2019.

Industry classification

Initial public offering and secondary offerings statistics are presented in this report using the Thomson Reuters Business Classification (TRBC). The economic sectors used in the analysis are the following:

Table A.2. Public offerings industry classification

Thomson Reuters Economic Sector
Basic Materials
Cyclical Consumer Goods / Services
Energy
Financials
Healthcare

Exclusion criteria

With the aim of excluding IPOs and SPOs by trusts, funds and special purpose acquisition companies the following industry categories are excluded:

• Financial companies that conduct trust, fiduciary and custody activities

• Asset management companies such as health and welfare funds, pension funds and their third party administration, as well as other financial vehicles

• Companies that are open-end investment funds

• Companies that are other financial vehicles

• Companies that are grant making foundations

• Asset management companies that deal with trusts, estates and agency accounts

• Special Purpose Acquisition Companies (SPACs)

• Closed-end funds

• Listings on an over the counter (OTC) market

• Security types classified as “units” and “trust”

• Real Estate Investment Trusts

• Transactions with missing or zero proceeds

C. Ownership data

The main source of information is FactSet Ownership database. This dataset covers companies with a market capitalisation of more than USD 50 million and accounts for all positions equal to or larger than 0.1% of the issued shares. Data is collected as of end of 2019 in current USD, thus no currency nor inflation adjustment is needed.

The data is complemented and verified using Thomson Reuters Eikon and Bloomberg. Market information for each company is collected from Thomson Reuters Eikon. For each of the following six economies (Austria, the Czech Republic, Germany, Hungary, Romania and Poland), the information presented in Chapter 4 corresponds to all listed companies in those markets.

Next, the information for all the owners reported as of the end of 2019 is collected for each company. Some companies can have up to 5 000 records in their list of owners. Each record contains the name of the institution, the percentage of outstanding shares owned, the investor type classification, the origin country of the investor, the ultimate parent name, among others. Each owner record is re classified into the following investor classes: Private corporations, Public sector, Strategic individuals, Institutional investors and Other free float. When the ultimate parent was recognised as a Government, the investor record is, by default, classified as Public sector. For example, public pension funds that are regulated under public sector law are classified as government, and sovereign wealth funds are also included in that same category.

D. Corporate bond data

Data shown on corporate bond issuances in Chapter 5 is based on original OECD calculations using data obtained from Thomson Reuters Eikon that provides international deal level data on new issues of corporate bonds, which are underwritten by an investment bank. Corporate bond data from Romania, Hungary, Poland and the Czech Republic also includes the non-underwritten ones retrieved through Thomson Reuters Eikon’s Bond Search application. The database provides a detailed set of information for each corporate bond issue, including the identity, nationality and sector of the issuer; the type, interest rate structure, maturity date and rating category of the bond, the amount of and use of proceeds obtained from the issue. For corporate bond data in Romania, information from the Bucharest Stock Exchange is also added to complement the original dataset.

The initial dataset covers observations in the period from 1 January 2000 to 31 December 2019. From this initial set, convertible bonds, deals that were registered but not consummated, preferred shares, sukuk bonds, bonds with an original maturity less than one year or an issue size less than USD 1 million are excluded.

The country breakdown is carried out based on the domicile country of the issuer. Issuance amounts initially collected in USD were adjusted by US Consumer Price Index (CPI) and finally converted to 2019 EUR using the average exchange rate EUR/USD for 2019.

E. Private equity data

The main source of information for the private equity data presented in Chapter 6 is Invest Europe / EDC. The information provided by Invest Europe is made up of firms managing investment vehicles or pools of capital (Funds) and primarily investing equity capital in enterprises not quoted on a stock market. Firms are included in the analysis as long as at least one of the funds they manage qualifies to the inclusion conditions; however, only the activity of the qualifying funds is taken into consideration.

The countries included when referring to Europe statistics are: Austria, Baltic countries (Estonia, Latvia, Lithuania), Belgium, Bulgaria, the Czech Republic, Denmark, Finland, France, Germany, Greece, Hungary, Ireland, Italy, Luxembourg, the Netherlands, Norway, Other CEE (Bosnia Herzegovina, Croatia, Macedonia, Moldova, Montenegro, Serbia, Slovenia, the Slovak Republic), Poland, Portugal, Romania, Spain, Sweden, Switzerland, Ukraine, United Kingdom.

The fundraising activities are classified according to the country that corresponds to the location of the advisory team of the fund. For the CEE region, fundraising activity is the sum of funds managed from the CEE region plus funds that have declared CEE as their target region. The amount reported under investments includes equity, quasi equity, mezzanine, unsecured debt and secured debt. Secured debts amounts within all investments packages are removed, unless the debt originates from private equity funds. Investment activities are recorded according to the location of the portfolio company. Divestment amounts are recorded at cost (i.e. the total amount divested is equal to the total amount invested previously). Private equity statistics are collected in current Euros. Amounts are then adjusted by using Euro CPI to express them in constant 2019 EUR.

The categories of private equity entities that are excluded from the Invest Europe Universe are: Fund of Funds, Hedge Funds, Real Estate, Project Financing/ Infrastructure, Secondary Funds, Distress Debt, Venture Credit, Participative Loans, Incubators, Accelerators, Business Angels and Holding companies.