IDEAS home Printed from https://ideas.repec.org/a/oup/jleorg/v19y2003i1p141-175.html
   My bibliography  Save this article

Why Are the Levels of Control (So) Different in German and U.K. Companies? Evidence from Initial Public Offerings

Author

Listed:
  • Marc Goergen
  • Luc Renneboog

Abstract

We analyze why the control of listed German and U.K. companies is so different. As shareholders in Germany are less protected and control is less expensive, German investors prefer controlling stakes. We also focus on economic factors such as profitability, risk, and growth to predict the probability of occurrence of different states of control six years after the flotation. Large U.K. companies become widely held, whereas in large German firms new shareholders control significantly larger stakes. Wealth constraints become binding for U.K. shareholders, whereas German shareholders can avoid this by using pyramids. We find substantial differences between a takeover by a concentrated shareholder and one by a widely held company. For the United Kingdom, the probability of the former increases when the company is risky, small, and poorly performing. Conversely, the latter is more likely when the target is large, fast growing, and profitable. Poor performance and high risk require control and monitoring by a concentrated shareholder. Conversely, high growth and profitability attract widely held companies. Founders are less inclined to dilute their stake to retain private benefits of control. When German firms are profitable and risky, control is likely to go to a concentrated shareholder, but growth and low profitability increase the probability of a control acquisition by a widely held firm. Copyright 2003, Oxford University Press.

Suggested Citation

  • Marc Goergen & Luc Renneboog, 2003. "Why Are the Levels of Control (So) Different in German and U.K. Companies? Evidence from Initial Public Offerings," Journal of Law, Economics, and Organization, Oxford University Press, vol. 19(1), pages 141-175, April.
  • Handle: RePEc:oup:jleorg:v:19:y:2003:i:1:p:141-175
    as

    Download full text from publisher

    To our knowledge, this item is not available for download. To find whether it is available, there are three options:
    1. Check below whether another version of this item is available online.
    2. Check on the provider's web page whether it is in fact available.
    3. Perform a search for a similarly titled item that would be available.

    References listed on IDEAS

    as
    1. Brunetti, Aymo & Weder, Beatrice, 2003. "A free press is bad news for corruption," Journal of Public Economics, Elsevier, vol. 87(7-8), pages 1801-1824, August.
    2. Torsten Persson & Gérard Roland & Guido Tabellini, 1997. "Separation of Powers and Political Accountability," The Quarterly Journal of Economics, Oxford University Press, vol. 112(4), pages 1163-1202.
    3. Stephen Knack & Philip Keefer, 1995. "Institutions And Economic Performance: Cross-Country Tests Using Alternative Institutional Measures," Economics and Politics, Wiley Blackwell, vol. 7(3), pages 207-227, November.
    4. repec:cup:apsrev:v:91:y:1997:i:03:p:531-551_21 is not listed on IDEAS
    5. Rogowski, Ronald, 1987. "Trade and the variety of democratic institutions," International Organization, Cambridge University Press, vol. 41(02), pages 203-223, March.
    6. Knack, Stephen & Keefer, Philip, 1995. "Institutions and Economic Performance: Cross-Country Tests Using Alternative Institutional Indicators," MPRA Paper 23118, University Library of Munich, Germany.
    7. John Ferejohn, 1986. "Incumbent performance and electoral control," Public Choice, Springer, vol. 50(1), pages 5-25, January.
    8. Kaufmann, Daniel & Kraay, Aart & Zoido-Lobaton, Pablo, 1999. "Aggregating governance indicators," Policy Research Working Paper Series 2195, The World Bank.
    9. Paolo Mauro, 1995. "Corruption and Growth," The Quarterly Journal of Economics, Oxford University Press, vol. 110(3), pages 681-712.
    10. Robert Barro, 1973. "The control of politicians: An economic model," Public Choice, Springer, vol. 14(1), pages 19-42, March.
    Full references (including those not matched with items on IDEAS)

    Citations

    Citations are extracted by the CitEc Project, subscribe to its RSS feed for this item.
    as


    Cited by:

    1. Svetlana BILOOCAIA, 2011. "Analysis of the Issuers’ Main Risks during the IPO," Risk in Contemporary Economy, "Dunarea de Jos" University of Galati, Faculty of Economics and Business Administration, pages 378-383.
    2. Ksenija Dencic-Mihajlov, 2009. "Reforms of Corporate Governance and Takeover Regulation: Evidence from Serbia," South-Eastern Europe Journal of Economics, Association of Economic Universities of South and Eastern Europe and the Black Sea Region, vol. 7(2), pages 205-227.
    3. Goergen, Marc & Manjon, Miguel C. & Renneboog, Luc, 2008. "Recent developments in German corporate governance," International Review of Law and Economics, Elsevier, vol. 28(3), pages 175-193, September.
    4. Marc Goergen, 2005. "Corporate Governance Convergence: Evidence From Takeover Regulation Reforms in Europe," Oxford Review of Economic Policy, Oxford University Press, vol. 21(2), pages 243-268, Summer.
    5. Goergen, Marc & Renneboog, Luc & Correia da Silva, Luis, 2005. "When do German firms change their dividends?," Journal of Corporate Finance, Elsevier, vol. 11(1-2), pages 375-399, March.
    6. Van der Elst, Christoph, 2004. "Industry-specificities and size of corporations: determinants of ownership structures," International Review of Law and Economics, Elsevier, vol. 24(4), pages 425-446, December.
    7. Goergen, Marc & Khurshed, Arif & Renneboog, Luc, 2009. "Why are the French so different from the Germans? Underpricing of IPOs on the Euro New Markets," International Review of Law and Economics, Elsevier, vol. 29(3), pages 260-271, September.
    8. Goergen, M. & Khurshed, A. & McCahery, J.A. & Renneboog, L.D.R., 2002. "The Rise and Fall of the European New Markets : On the Short and Long-Run Performance of High-Tech Initial Public Offerings," Discussion Paper 2002-101, Tilburg University, Center for Economic Research.
    9. Marc Goergen & Miguel Manjon & Luc Renneboog, 2008. "Is the German system of corporate governance converging towards the Anglo-American model?," Journal of Management & Governance, Springer;Accademia Italiana di Economia Aziendale (AIDEA), vol. 12(1), pages 37-71, March.
    10. Köhler, Matthias, 2009. "Blockholdings and corporate governance in the EU banking sector," ZEW Discussion Papers 08-110 [rev.], ZEW - Zentrum für Europäische Wirtschaftsforschung / Center for European Economic Research.
    11. Sudi Sudarsanam & Tim Broadhurst, 2012. "Corporate governance convergence in Germany through shareholder activism: Impact of the Deutsche Boerse bid for London Stock Exchange," Journal of Management & Governance, Springer;Accademia Italiana di Economia Aziendale (AIDEA), vol. 16(2), pages 235-268, May.
    12. Franck Bancel & Usha R. Mittoo, 2013. "Survey evidence: what do we know about European and US firms’ motivations for going public?," Chapters,in: Handbook of Research on IPOs, chapter 3, pages 57-75 Edward Elgar Publishing.
    13. Marc Goergen & Christine A. Mallin & Eve Mitleton-Kelly & Ahmed Al-Hawamdeh & Iris H-Y Chiu, 2010. "Corporate Governance and Complexity Theory," Books, Edward Elgar Publishing, number 13927, April.
    14. Martynova, M., 2006. "The market for corporate control and corporate governance regulation in Europe," Other publications TiSEM 8651e281-4914-41f2-ac14-1, Tilburg University, School of Economics and Management.
    15. C. van der Elst, 2004. "Industry-specificities and Size of Corporations: Determinants of Ownership Structures," Working Papers 04-19, Utrecht School of Economics.
    16. Victoria Krivogorsky & Gary Grudnitski, 2010. "Country-specific institutional effects on ownership: concentration and performance of continental European firms," Journal of Management & Governance, Springer;Accademia Italiana di Economia Aziendale (AIDEA), vol. 14(2), pages 167-193, May.
    17. Santella, Paolo & Baffi, Enrico & Drago, Carlo & Lattuca, Dino, 2008. "A Comparative Analysis of the Legal Obstacles to Institutional Investor Activism in Europe and in the US," MPRA Paper 8929, University Library of Munich, Germany.
    18. Nancy Huyghebaert & Qi Quan, 2011. "Ownership Dynamics after Partial Privatization: Evidence from China," Journal of Law and Economics, University of Chicago Press, vol. 54(2), pages 389-429.
    19. Szilagyi, P.G., 2007. "Corporate governance and the agency costs of debt and outside equity," Other publications TiSEM 9520d40a-224f-43a8-9bf9-b, Tilburg University, School of Economics and Management.

    More about this item

    Statistics

    Access and download statistics

    Corrections

    All material on this site has been provided by the respective publishers and authors. You can help correct errors and omissions. When requesting a correction, please mention this item's handle: RePEc:oup:jleorg:v:19:y:2003:i:1:p:141-175. See general information about how to correct material in RePEc.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: (Oxford University Press) or (Christopher F. Baum). General contact details of provider: https://academic.oup.com/jleo .

    If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

    We have no references for this item. You can help adding them by using this form .

    If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your RePEc Author Service profile, as there may be some citations waiting for confirmation.

    Please note that corrections may take a couple of weeks to filter through the various RePEc services.

    IDEAS is a RePEc service hosted by the Research Division of the Federal Reserve Bank of St. Louis . RePEc uses bibliographic data supplied by the respective publishers.