Private benefits and minority shareholder expropriation : empirical evidence from IPOs of German family-owned firms

Our study examines the existence and the nature of private benefits of control in Germany. We do this by analyzing initial public offerings of founding-family owned firms and tracking their fate up to ten years following the IPO. Our sample includes a uniquely rich data set of 105 IPOs of family-owned firms floated from 1970 to 1991 on German stock exchanges. We find that, first, even ten years after the IPO, family owners, in the cross section, continue to exercise considerable control. Second, we show that there exist substantial private benefits of control in these firms and - to our understanding for the first time - we empirically measure what the nature of these private benefits really is. We also show that the separation of cash flow rights and voting rights via the issuance of dual-class shares is used to create controlling shareholder structures in order to preserve these private benefits. Third, we find a puzzling and significant underperformance of dual-class share IPOs, which can be explained by ex ante unanticipated expropriation of minority shareholders due to poor investor protection in Germany. This Version: 4th draft, November 2001 This paper has been presented at the European Financial Management Association 2001 Meeting in Lugano, the CEPR Conference "The Firm and its Stakeholders" in Courmayeur, the Fall 2000 WAFA Conference in Washington, D.C., the European Economic Association 2000 Conference in Bozen, the ABN AMRO International Conference on IPOs in Amsterdam, the SIRIF Conference on Corporate Governance in Edinburgh, the Financial Center Seminar at the Tinbergen Institute Rotterdam, and the G-Forum on Entrepreneurship Research in Vienna. Klassifikation: G14, G32, G1

Uncertain private benefits and the decision to go public

This paper focuses on the decision to go public when both seller and potential buyers have private benefits of control. The basic model by Zingales (1995) is extended to account for uncertainty of private benefits. This leads to new implications for the sales process, ownership structure, measurement of private benefits and the efficiency of takeover regimes. The optimal way to sell the company differs from the model with perfect information in that the incumbent always choses to go public instead of selling directly to a potential rival whenever the rival is expected to increase cash flow but not necessarily total firm value. IPO price and volume are lower than under perfect information which induces a socially non-optimal solution in takeover transactions. Imperfect information also explains post-IPO underperformance of firms which are not subject to control transfers. To compensate shareholders for potential losses during the sales process, the offering price has to be lower than under perfect information. This provides the basis for a differential stock price performance depending on the buyer taking over or not. Furthermore, an overestimation bias exists in prior estimates of control premiums, because some firms going public are never sold but nevertheless provide private benefits. Finally, mandatory tender offers in the form of a fair price rule and an equal opportunity rule are discussed, which indicate that the social superiority of either rule is strongly dependent on the empirical distribution characteristics of private benefits. --initial public offerings (IPOs),corporate control,private benefits,long-run performance,mandatory bid

Konzerneinfluss und Entkopplung vom Marktrisiko — Eine empirische Analyse der Betafaktoren bei faktischen und Vertragskonzernen

Zusammenfassung: Im vorliegenden Beitrag werden die Betafaktoren beherrschter Unternehmen bei faktischen und Vertragskonzern-Verhältnissen bis hin zum Squeeze-Out untersucht. Die Ergebnisse zeigen signifikant abnehmende Betafaktoren über verschiedene Konzernstufen. Bei Vertragskonzernen mit Beherrschungs- und Gewinnabführungsvertrag und Squeeze-Out-Unternehmen sinken die Betafaktoren der beherrschten Unternehmen auf Werte nahe Null. Die Ergebnisse sind ein Beleg für einen Marktrisiko-Entkopplungseffekt bei Unternehmen, die einem Konzerneinfluss unterliegen. Die Aktien von Minderheitsaktionären beherrschter Unternehmen haben somit im Durchschnitt eine niedrigere Risikoklasse als Aktien von Unternehmen im Streubesitz. Für die Betaschätzung zur Bewertung von Unternehmen mit einem geringen Streubesitzanteil empfehlen wir deshalb, spezielle Regressionsverfahren für unregelmäßig gehandelte Aktien (z.B. Trade-to-Trade-Verfahren) der Verwendung von Peer-Group-Betas vorzuziehe

A three stepped coordinated Level Set Segmentation Method for Identifying atherosclerotic plaques on MR-images

In this work we propose an adapted level set segmentation technique for the recognition of atherosclerotic plaque tissue on magnetic resonance images. The segmentation technique is subdivided into three steps whereas the result of every phase serves as additional prior knowledge for the next level set step. By incorporating special knowledge derived from the images into the level set equation we guide the level set towards the desired plaque patterns. By analyzing and applying carefully all disposable channel information we are capable to border the vessel walls on the images and after that approach an enclosing level set which circumvents the plaque patterns from healthy media tissue. We support the plaque detection with so-called canny edges and locally weighted intensity information for conspicuous plaque patterns. We justify the introduction of a maximal shrinking distance of the 3rd level set in the vessel wall for supporting segmentation and show very promising results of this method in special figures during the level set propagation. By extending the level set segmentation with our concepts of locally weighted intensity information and the maximal shrinking distance we teach the level sets to segment the dangerous plaque patterns very exactly. Furthermore we are capable to emphasize and segment plaque patterns which are difficult to recognize even for the human observer

Kursunterschiede und Renditen deutscher Stamm- und Vorzugsaktien

In der vorliegenden Untersuchung betrachten wir die Grundgesamtheit der deutschen Unternehmen, von denen im Zeitraum 1956 bis 1998 Stamm- und stimmrechtslose Vorzugsaktien börsennotiert waren. Zwischen beiden Aktiengattungen besteht mit durchschnittlich 17,2 Prozentpunkten ein ökonomisch und statistisch signifikanter Kursunterschied, und zwar für alle Marktsegmente und betrachteten Teilperioden. Der durchschnittliche Kursunterschied unterliegt im Zeitablauf aber starken Schwankungen, die in hohem Maße mit einer Veränderung des Anteils von Familienunternehmen korrelieren und damit mit der Höhe privater Kontrollrenten in Verbindung stehen. Unternehmensspezifische Unterschiede in der Höhe des Kursaufschlages sind nach unseren Ergebnissen außerdem mit unterschiedlichen Konzentrationen des Anteilsbesitzes verbunden. Positive Stimmrechtsprämien am deutschen Markt können trotz nahezu fehlender feindlicher Übernahmen auch durch mögliche Koalitionsbildungen zur Ausübung von Vetorechten erklärt werden. Unsere Untersuchungen zeigen ferner, dass sich die Aktienrenditen für Stamm- und Vorzugsaktien haltende Minderheitsaktionäre nicht signifikant unterscheiden; der tatsächliche Dividendenvorteil der Vorzugsaktien ist relativ gering

The evolution of German industrial legends: The case of Baden-Wurttemberg, 1940-2007

Combining agency-theoretical with organisational population ecology approaches, this article analyses which factors drive the survival probabilities of organisations of the same type - listed stock corporations - facing the same institutional environment over a long period of time. It presents results from a unique hand-collected data set starting with the 51 largest firms in Baden-Wurttemberg in 1940 and follows their evolution for five time points from 1949 until 2007. Through an econometric survival analysis it is found that (i) the presence of multiple blockholders; (ii) a healthy capital structure (capital gearing); and (iii) the number of subsidiaries all have a positive impact on the probability of survival of the companies in our sample. To complement the findings from the survival analysis three exemplified anecdotal case studies are presented as narratives which are supportive of the general findings.corporate governance, organisational ecology, survival analysis, SSOP methodology, evolutions of firms,