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Unintented consequences of German stock delisting legislation

Author

Listed:
  • Michael Florig

    (Economics Department, Ecole Polytechnique)

  • Olivier Gossner

    (CNRS-CREST, Ecole Polytechnique and London School of Economics)

Abstract

The German stock exchange act enables a company’s management to delist the shares without shareholder consent, provided a sponsor of the delisting offers to acquire outstanding shares at a price equal to at least a six month average of the share price. We capture the economic impact of this legislation in a model in which management has the option to delist the stock after public release of information. Delistings are likely to follow positive news on the asset value, which depresses the stock value even before information is released. This makes the option to delist even more attractive and generates a downwards self-reinforcing loop on stock price. Such unintended consequences of the legislation could be mitigated via mandatory shareholder consent, similar to the current French or UK legislation, by giving minority shareholders an appraisal right as in the US, or by requiring an independent expert evaluation.

Suggested Citation

  • Michael Florig & Olivier Gossner, 2023. "Unintented consequences of German stock delisting legislation," Working Papers 2023-01, Center for Research in Economics and Statistics.
    • Handle: RePEc:crs:wpaper:2023-01
    as

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    References listed on IDEAS

    as
    1. Lucian Arye Bebchuk & Marcel Kahan, 2000. "Adverse Selection and Gains to Controllers in Corporate Freezeouts," NBER Chapters, in: Concentrated Corporate Ownership, pages 247-264, National Bureau of Economic Research, Inc.
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    More about this item

    Keywords

    delisting; stock valuation;

    JEL classification:

    • G12 - Financial Economics - - General Financial Markets - - - Asset Pricing; Trading Volume; Bond Interest Rates
    • G13 - Financial Economics - - General Financial Markets - - - Contingent Pricing; Futures Pricing
    • G14 - Financial Economics - - General Financial Markets - - - Information and Market Efficiency; Event Studies; Insider Trading
    • G30 - Financial Economics - - Corporate Finance and Governance - - - General
    • K20 - Law and Economics - - Regulation and Business Law - - - General

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