Abstract
This paper examines the three cases of hostile takeovers in Germany in the post Second World War period. It describes the important role played by banks in a€ecting the outcome of the bids: bank representatives were chairmen of the supervisory board in all three cases and banks voted a large number of proxies in important decisions af- fecting the bids. The paper reports that low returns were earned by shareholders of two of the target ®rms and o€ers an explanation in terms of bank control and the regulatory regime operating in Germany. Ó 1998 El
1. Introduction
The recent attempted hostile acquisition of Thyssen AG by Krupp AG has once again brought to the fore the operation of the German corporate governance system and the role of the banks. The banks have been seen tosevier Science B.V. All rights reserved. be instrumental in orchestrating and organising the raid. To some, most notably German steel workers and particular politicians, the banks have abused the social values of the German governance system. To others, they have let shareholders down in failing to push through the bid to the bitter end.
Hostile takeovers in Germany are an important subject of study for two reasons. Firstly, there are not many of them: only three in the whole of the post Second World War period. Secondly, although they are the earth- quakes of German corporate governance and should not therefore be re- garded as examples of normal practice, they do allow us to observe the operation of German corporate governance and the behaviour of banks with an unusual measure of clarity. In addition, they provide an interesting laboratory on how a virtually unregulated takeover market a€ects share- holder returns.
In particular, we want to use the hostile bids to examine two questions: ®rstly, do banks exercise substantial control during these turbulent periods and, secondly, if they do, in whose interests do they act. There is continuing discussion amongst both academics and policy makers about the power of German banks. In principle, concentration of control through proxy votes should encourage more active corporate governance by German banks than by UK and US ®nancial institutions which hold much smaller stakes and large highly diversi®ed portfolios of shares. Since banksÕ own shareholdings are in general modest, where con¯icts arise between shareholder interests and in- cumbent management, banks may attach less signi®cance to their custodian functions than to the margin and fee income which they derive from com- mercial and investment banking. Banks may also feel they have obligations to other stakeholders such as employees and managers.
We ®nd that banks do exert signi®cant in¯uence over the outcomes of bids, their power in large part deriving from their chairmanship of supervi- sory boards, and the proxy votes which they cast on behalf of individual shareholders. The latter may be especially important where there are re- strictions on voting rights: these limit the votes that large blockholders can cast but not those of banks acting as custodians of small shareholders. We ®nd that returns to shareholders who do not sell their shares to acquirors are very low and even negative in two of the bids. These low bid premia may be explained by banksÕ concern with interests other than those of shareholders; alternatively, they may result from the virtual absence of takeover regulation in Germany. 留学生论文代写网代写留学生论文,英国硕士论文,澳洲论文,