Ettore Croci, Eric Nowak and Olaf Ehrhardt
The purpose of this paper is to examine minority squeeze-outs and their regulation in Germany, a country where majority shareholders have extensively used this tool since its…
Abstract
Purpose
The purpose of this paper is to examine minority squeeze-outs and their regulation in Germany, a country where majority shareholders have extensively used this tool since its introduction in 2002. Using unique hand-collected data, the authors carry out the first detailed analysis of the German squeeze-out offers from the announcement to the outcome of post-deal litigation, examining also the determinants of the decision to squeeze-out minority investors.
Design/methodology/approach
Using unique data on court rulings and compensations, the authors analyze a sample of 324 squeeze-outs of publicly listed companies from 2002 to 2011 to carry out the first detailed analysis of the squeeze-out procedure and the post-deal litigation. The authors employ the event study methodology to assess the stock market reaction around the announcement of the squeeze-out.
Findings
Large firms with foreign large shareholders are the most likely to be delisted. Positive stock price performance increases the likelihood of a squeeze-out, but operating performance has the opposite effect. Stock prices react positively to squeeze-out announcements, in particular when the squeeze-out does not follow a previous takeover offer. Post-deal litigation is widespread: nearly all squeeze-outs are legally challenged by minority shareholders. Additional cash compensation is larger in appraisal procedures, but actions of avoidance are completed in less time. Overall, the evidence suggests that starting post-deal litigation by challenging the cash compensation offered in a squeeze-out delivers high returns for minority investors.
Research limitations/implications
The lack of data concerning the identity of minority shareholders in firms undergoing a squeeze-out does not allow a proper investigation of the incentives of the different types of investors.
Practical implications
The paper provides evidence about the incentives of the different players in a squeeze-out offer. The findings of the paper could be helpful in assessing the impact of the squeeze-out rule. The results also contribute to the understanding of minority investors’ incentives to start post-deal litigation.
Originality/value
This paper provides new evidence about post-deal litigation, in particular how investors use the procedures that the system provides them to protect themselves against controlling shareholders. The paper examines all the phases of the squeeze-out procedure and challenges.
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This chapter is a case study of the valuation of voting rights in France and Italy. New regulations, France’s “Florange Law” as well as Italian Legislative Decree 91/2014, have…
Abstract
This chapter is a case study of the valuation of voting rights in France and Italy. New regulations, France’s “Florange Law” as well as Italian Legislative Decree 91/2014, have created additional voting rights attached to the existing shares of long-term shareholders. The chapter tests whether stock price evolution is consistent with the valuation of voting rights as per existing research.
Results show that stock prices of the float do not factor in the dilution created by loyalty voting rights. The chapter argues that the dilutive effect of the new regulations has a negative impact on stock valuation, but that this is more than offset by taking into account real options. These results address the concern that the new policies would depress stock valuation in France and Italy.
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The purpose of this paper is to give an overview of UAE Stock Exchange industry. In particular this paper aims to assess a potential merger between Dubai Financial…
Abstract
Purpose
The purpose of this paper is to give an overview of UAE Stock Exchange industry. In particular this paper aims to assess a potential merger between Dubai Financial Markets-Nasdaq-Dubai and Abu Dhabi Securities Exchange, evaluating risks, rewards, policy and business implications.
Design/methodology/approach
The paper presents a theoretical framework and a literature review of M & As in financial sector. It then carries out a case study on a potential merger between the UAE Stock Exchanges and a discussion on the implications for the actors involved.
Findings
The contraction both in market capitalization and in trading value in the three UAE Stock Exchanges caused by subprime financial crisis and market fragmentation could be a key factors in implementing a merger between them. Because of high-fixed costs and trading platform, a single consolidated stock exchange may benefit from significant economies of scale, particularly network effects, and economies of scope.
Practical implications
This paper could be useful to Security and Commodity Authority, in order to support a merger between Dubai and Abu Dhabi Stock Exchange. Given that UAE capital market regulator has tried to improve efficiency in UAE stock market over the last years, a merger between UAE Stock Exchanges could have positive effects on overall efficiency.
Originality/value
It is the first paper that analyze UAE Stock Exchange industry. It is the first study that focusses on a potential merger between emerging markets’ stock exchanges. It is one of the first contributions that relates stock exchanges belonging to emerging and developed countries.