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Minority Shareholder Monitoring and German Corporate Governance

Empirical Evidence and Value Effects


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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II. Shareholder Activism in Germany – An Empirical Review


Abstract According to agency theory shareholders can reduce agency costs and increase firm value through monitoring the management. The international literature claims that shareholders of German corporations are weak owners given the pe- culiarities of the corporate governance system and that their activities are insig- nificant. This study examines the monitoring activities of activist minority shareholders in Germany between January 1999 and May 2011. A sample of 253 cases of potentially activist stakes in 140 target firms is analysed. Open dis- putes between shareholder and activist occur in approximately one out of four cases. Some disputes lead to a dismissal of members of the supervisory board or the management board. The average activist stake measures 5.9 percent and therefore activist investors frequently leverage their influence by simultaneously targeting firms. 26 II.1. Introduction “Shareholder activism has not played an important role in Germany so far.” This is a quote from the introduction to the doctoral thesis of Max Steiger (2000) on the impact of institutional investors on corporate governance. It describes very well the situation in Germany until the year 2000. In 2004, a hedge fund pub- licly criticised the management of stock market-listed soccer club Borussia Dortmund. In 2005, activist shareholders removed the management of Deutsche Boerse. Prior to the 2007 annual meeting of CeWe Color Holding, there was a public dispute about future strategy between the firm’s management and a group of minority shareholders. Shareholder activism in Germany is obviously becom- ing a more prominent topic. Gillan and Starks...

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