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Wealth effects of private equity investments on the German stock market

Author

Listed:
  • Ann-Kristin Achleitner
  • Christian Andres
  • Andre Betzer
  • Charlie Weir

Abstract

This paper investigates the wealth effects of private equity (PE) investor purchases of shares in German quoted companies. It is the first study to analyse these effects for the German market, which is particularly interesting due to its distinct characteristics with regard to the ownership structure of publicly listed companies and the protection of minority shareholders. We find that PE investors generate positive wealth effects for target shareholders of 5.90% around the event day (t=-1 to t=0). In addition, we find that the wealth effects of PE investor involvement in Germany are positively related to the target's tax liabilities and degree of undervaluation and negatively related to the target's leverage and the shareholding of the second largest ownership block. The latter effect can be interpreted as a supplementary monitoring effect of the management or a monitoring effect of the largest shareholder through which private benefits of control are reduced.

Suggested Citation

  • Ann-Kristin Achleitner & Christian Andres & Andre Betzer & Charlie Weir, 2011. "Wealth effects of private equity investments on the German stock market," The European Journal of Finance, Taylor & Francis Journals, vol. 17(3), pages 217-239.
  • Handle: RePEc:taf:eurjfi:v:17:y:2011:i:3:p:217-239
    DOI: 10.1080/13518470903448465
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    References listed on IDEAS

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    1. repec:eee:fambus:v:9:y:2018:i:4:p:268-292 is not listed on IDEAS
    2. Thorsten Knauer & Friedrich Sommer, 2012. "Interest barrier rules as a response to highly leveraged transactions: Evidence from the 2008 German business tax reform," Review of Accounting and Finance, Emerald Group Publishing, vol. 11(2), pages 206-232, May.

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    Keywords

    wealth effects; private equity; Germany;

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