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Minority Shareholder Monitoring and German Corporate Governance

Empirical Evidence and Value Effects

Series:

Christian Thamm

This book comprises three studies on minority shareholder monitoring in Germany. Mandatory disclosure requirements have increased transparency. An analysis of the information that is publicly available is presented, regardless of the size of the target corporation. The second essay in the form of an event study pays special attention to the German supervisory board and its appointment for a fixed term. Capital markets perceive an activist effort as being more credible under certain circumstances. The study as a whole is empirical evidence for increased minority shareholder activity in Germany. The evidence presented supports the strong shareholder rights perspective. It conflicts with the weak shareholder rights view brought forward in the international literature.

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Table of Contents

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Preface .................................................................................................................. V Acknowledgements ............................................................................................. VI Table of Contents ............................................................................................... VII List of Figures ...................................................................................................... X List of Tables ....................................................................................................... XI List of Abbreviations ........................................................................................ XIII List of Symbols ................................................................................................. XV I. Introduction .................................................................................................. 1 I.1. Preface ................................................................................................... 1 I.2. Definition of Shareholder Activism and Corporate Governance ......... 2 I.3. Theoretical Framework ......................................................................... 6 I.4. Research on Shareholder Activism in Germany ................................... 7 I.5. Research on Shareholder Activism in the U.S. ................................... 13 I.6. Development of Hypotheses ............................................................... 14 I.7. Remarks on the Collection of Data ..................................................... 15 I.8. Presentation of Studies and Contribution to Literature ...................... 19 I.8.1. First study: Shareholder Activism in Germany – An Empirical Review........ .................................................................................... 19 I.8.2. Second Study: Activist Shareholders, Abnormal Returns, and the German Aufsichtsrat ................................................................. 19 I.8.3. Third Study: Weak Shareholder Rights? – A Case Study of Cevian Capital’s Investment in Demag Cranes AG ....................... 23 VIII II. Shareholder Activism in Germany – An Empirical Review .................. 25 II.1. Introduction ......................................................................................... 26 II.2. Literature Overview ............................................................................ 27 II.3. Data Collection.................................................................................... 31 II.4. Descriptive Statistics: Target Firm, Stake Size and Activist Shareholders ........................................................................................ 35 II.5. Shareholder Activism and its Effects .................................................. 40 II.6. Summary of Results ............................................................................ 48 III. Activist Shareholders, Abnormal Returns, and the German Aufsichtsrat ................................................................................................ 51 III.1. Introduction ......................................................................................... 52 III.2. Three Cases of Shareholder Activism................................................. 53 III.3. Literature Background, Corporate Governance Framework and Research Hypotheses .......................................................................... 54 III.4. Data and Methodology ........................................................................ 57 III.5. Results ................................................................................................. 60 III.5.1. Announcement Effects ................................................................. 60 III.5.2. NewBET Analysis ........................................................................ 63 III.5.3. Determinants of Abnormal Returns ............................................. 68 III.6. Conclusion........................................................................................... 71 IV.Weak Shareholder Rights? – A Case Study of Cevian Capital’s Investment in Demag Cranes AG ............................................................ 73 IV.1. Introduction ......................................................................................... 74 IX IV.2. German Supervisory Board and U.S. Board of Directors...

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