The role of hostile stakes in German corporate governance - 华人留学生英语论文网

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The role of hostile stakes in German corporate governance

时间:2011-09-11 01:47来源:未知作者:wlunwen.com 点击:次

http://www.wlunwen.comAbstract This article uses clinical evidence to show how the German system of corporate control and governance is both more active and more hostile than has previously been suggested. It provides a complete breakdown

　　

http://www.wlunwen.comAbstract
This article uses clinical evidence to show how the German system of corporate control and governance is both more active and more hostile than has previously been suggested. It provides a complete breakdown of ownership and takeover defence patterns in German listed companies and finds highly fragmentedŽbut not dispersed.ownership in non-majority controlled firms. We document how the accumulation of hostile stakes can be used to gain control of target companies given these ownership patterns. The article also suggests an important role for banks in helping predators accumulate, and avoid the disclosure of, large stakes. q2001 Elsevier Science B.V. All rights reserved.
1. Introduction
There is a widespread belief that the German system of corporate governance exhibits a very low level of hostility. In the stereotypical view of German finance, hostile tender offers are virtually unheard of, with banksŽrather than markets. assumed to play an important role in both the financing and control of German corporations.1 This article challenges some important elements of this view. It is certainly true, notwithstanding the recent successful tender offer for Mannesmann by Vodafone–Airtouch, that hostile tender offers have played almost no role in disciplining incumbent management.2 However, we suggest that there is a much greater incidence of outsiders accumulating hostile stakes or blocks in an attempt to gain control. Hostile stakes are often built by coalitions of large investors who share dissatisfaction with the incumbent management, or have other motives for seeking control. One such particularly important motive may be the expropriation of minority shareholders. The dynamics of hostile stakebuilding are complex and difficult to observe—in many cases it is not possible simply to look at a share register and infer who is exerting control over the company. This opaqueness derives from the low level of transparency of share stakes and weak regulation of parties acting in concert. Our article seeks to overcome this opacity by taking a AclinicalB, or case study approach, looking in detail at the dynamics of stake accumulation, and the control battles that ensued.
This approach is both a strength and weakness of the paper. We identify 17 cases of hostile stakebuilding over an 8-year period. This is clearly not a large number in absolute terms, or relative to the total number of listed companies in GermanyŽfewer than 600 at the time.. However, one should not jump to conclusions too quickly. In common with a number of other countries in Europe Žexcluding the UK.ownership concentration is very high in Germany.3 In Section 2 we look in detail at the ownership structure, and takeover defences, of all German listed companies and find that as few as 64 German companies may be vulnerable to hostile attack. The resulting 3–4% per annum incidence of hostile stakebuilding is surprisingly similar to the incidence of hostile tender offers in, for example, the UK.4
However, while we argue that this incidence is economically significant, and has not previously been identified, the low absolute number of cases precludes econometric testing of formal hypotheses. On the other hand, we are able, through the clinical approach, to analyse in considerable detail the behaviour of the various parties involved in the control contest. For example, we analyse the behaviour of banks in such battles and find their role to be much more complex than has previously been documented. Far from protecting incumbent management, on a number of occasions, German banks have been actively involved in bringing about hostile changes of control by facilitating stakebuilding. We show how banks can assist predator companies in the accumulation of hostile stakes, and how beneficial ownership can be obscured. We also consider how the regulatory environment allows such stake accumulation to occur and whether recent important changes— such as the introduction of Germany’s first Takeover Code—will influence the way that corporate control is exercised in the future. The contributions of this article are, therefore, empirical. The findings are relevant to a number of different areas of research. First, there is a rich literature, mainly focused on US companies and markets, which investigates the links between ownership structure and corporate performance. Most of this literature takes as its starting point, the Berle and MeansŽ1932.thesis that dispersed ownership leads to an agency conflict betweenŽweak. owners andŽstrong. managers. Blocks in this context are typically thought to perform one of two roles: a toehold prior to a hostile takeover ŽShleifer and Vishny, 1986; Bulow et al., 1999. or a way to mitigate the free-rider problem in monitoring management ŽButz, 1994; Mørck et al., 1989.. The second of these roles has recently attracted a lot of attention. One strand of the literature looks at acquisitions of 5% or more in the US, that is, the emergence of new blocks. These ‘partial acquisitions’ are typically greeted with positive share price responses both for the target and the buyer Žsee Mikkelson and Ruback, 1985, for public 13-D acquisitions, Wruck, 1989, for private placements., indicating that increases in ownership concentration are value-increasing. Moreover, consistent with the Berle–Means thesis, targets tend to have performed poorly prior to the partial acquisition ŽChoi, 1991; Bethel et al., 1998.and be more diversifiedŽBethel et al., 1998., while subsequent target firm operating and financial behaviour is positively affectedŽSpencer et al., 1998. and CEO turnover increases substantiallyŽBethel et al., 1998..

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