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Business Groups, Bank Control, and Large Shareholders: An Analysis of German Takeovers

  • Boehmer, Ekkehart

I analyse the effect of ownership structure and bank control on performance. I employ a unique data set of 715 German takeovers to test whether group structure, large shareholders, and bank control affect their value to shareholders. First, I find that takeovers increase bidder value, but generally not that of the business group surrounding it. Second, majority owners provide no clear benefit. Third, bank control is only beneficial if it is counter-balanced by another large shareholder. Fourth, the worst takeovers are completed by firms that are majority-controlled by financial institutions.

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Article provided by Elsevier in its journal Journal of Financial Intermediation.

Volume (Year): 9 (2000)
Issue (Month): 2 (April)
Pages: 117-148

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Handle: RePEc:eee:jfinin:v:9:y:2000:i:2:p:117-148
Contact details of provider: Web page: http://www.elsevier.com/locate/inca/622875

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  1. Jensen, Michael C, 1986. "Agency Costs of Free Cash Flow, Corporate Finance, and Takeovers," American Economic Review, American Economic Association, vol. 76(2), pages 323-29, May.
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  3. Randall Morck & Andrei Shleifer & Robert W. Vishny, 1989. "Do Managerial Objectives Drive Bad Acquisitions?," NBER Working Papers 3000, National Bureau of Economic Research, Inc.
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  7. Lang, Larry H. P. & Stulz, ReneM. & Walkling, Ralph A., 1991. "A test of the free cash flow hypothesis*1: The case of bidder returns," Journal of Financial Economics, Elsevier, vol. 29(2), pages 315-335, October.
  8. M. Becht & E. Böhmer, 1997. "Transparency of Ownership and Control in Germany," SFB 373 Discussion Papers 1997,91, Humboldt University of Berlin, Interdisciplinary Research Project 373: Quantification and Simulation of Economic Processes.
  9. Luigi Zingales, 1997. "Corporate Governance," NBER Working Papers 6309, National Bureau of Economic Research, Inc.
  10. Cable, John R, 1985. "Capital Market Information and Industrial Performance: The Role of West German Banks," Economic Journal, Royal Economic Society, vol. 95(377), pages 118-32, March.
  11. Roll, Richard, 1986. "The Hubris Hypothesis of Corporate Takeovers," The Journal of Business, University of Chicago Press, vol. 59(2), pages 197-216, April.
  12. Jensen, Michael C. & Ruback, Richard S., 1983. "The market for corporate control : The scientific evidence," Journal of Financial Economics, Elsevier, vol. 11(1-4), pages 5-50, April.
  13. Scholes, Myron & Williams, Joseph, 1977. "Estimating betas from nonsynchronous data," Journal of Financial Economics, Elsevier, vol. 5(3), pages 309-327, December.
  14. Yakov Amihud & Baruch Lev, 1981. "Risk Reduction as a Managerial Motive for Conglomerate Mergers," Bell Journal of Economics, The RAND Corporation, vol. 12(2), pages 605-617, Autumn.
  15. Bradley, Michael & Desai, Anand & Kim, E. Han, 1988. "Synergistic gains from corporate acquisitions and their division between the stockholders of target and acquiring firms," Journal of Financial Economics, Elsevier, vol. 21(1), pages 3-40, May.
  16. Boehmer, Ekkehart & Masumeci, Jim & Poulsen, Annette B., 1991. "Event-study methodology under conditions of event-induced variance," Journal of Financial Economics, Elsevier, vol. 30(2), pages 253-272, December.
  17. Shleifer, Andrei & Vishny, Robert W, 1988. "Value Maximization and the Acquisition Process," Journal of Economic Perspectives, American Economic Association, vol. 2(1), pages 7-20, Winter.
  18. Lang, Larry H. P. & Stulz, ReneM. & Walkling, Ralph A., 1989. "Managerial performance, Tobin's Q, and the gains from successful tender offers," Journal of Financial Economics, Elsevier, vol. 24(1), pages 137-154, September.
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