Board members in squeeze-out transactions: an event study analysis

In this study, we investigate the role of board members in German squeeze-out transactions by applying the event study methodology. We find that a dismissal of a management board member is associated with lower cumulative abnormal returns in the period of three months preceding the squeeze-out announcement. This indicates that minority shareholders receive a lower compensation if management board members are dismissed prior to the squeeze-out announcement. Though we are cautious to draw inferences from this finding, we follow other scholars (e.g., Daske et al., 2010) and suggest that majority shareholders exploit their superior status and use its power opportunistically. We furthermore explore the effects of directors' dealings in a squeeze-out transaction. We find that if stock purchases take place in a period of one year preceding the announcement, abnormal returns tend to be lower in the run-up period and higher on the announcement date.