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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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IV. Weak Shareholder Rights? – A Case Study of Cevian Capital’s Investment in Demag Cranes AG

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Abstract Activist shareholders Cevian Capital and Centaurus Capital played an important role in the takeover of Demag Cranes AG by U.S. rival Terex Corporation. This was possible through supervisory board representation and through publicly urg- ing Demag to start merger talks. The Demag case shows that the German corpo- rate governance system and minority shareholder rights are well-developed. It also serves as empirical evidence and that small shareholders actively participate in corporate governance. An overview of cases where seats on the supervisory board of German stock corporations have been obtained through minority share- holders is presented. This evidence further supports the strong shareholder rights perspective in Germany. The evidence presented in this study conflicts with the view of Shleifer and Vishny (1997): “Germany (…) has virtually no participa- tion by small investors in the market” and the weak shareholder rights perspec- tive in general. 74 IV.1. Introduction The purpose of this study is to shed light on the topic of small investor participa- tion and shareholder rights in Germany. Shleifer and Vishny (1997) in their sur- vey of corporate governance around the world argue that “Germany (…) has virtually no participation by small investors in the market”. Is this true? The case study evidence presented in this analysis substantially challenges this view. Minority shareholder rights in Germany appear to be strong and small share- holders do participate in corporate governance. Differences between the German corporate governance system and its U.S. counterpart will be highlighted throughout this study as this is vital for...

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