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| Author: | Dittman, I. Ulbricht, N. |
| Title: | Timing and wealth effects of German dual class stock unifications |
| Journal: | European Financial Management
2008 : JAN, VOL. 14:1, p. 163-196 |
| Index terms: | finance capital structure of companies liquidity stocks shares shareholders Germany |
| Freeterms: | ownership structure |
| Language: | eng |
| Abstract: | This paper examines the reasons and the costs of separating ownership from control by analyzing the decision of German dual class (henceforth as: d-c.) firms to consolidate their share structure from d-c. to single class (as: s-c.) equity from 1990 to 2001. It is found that the firm value increases significantly by an average 4 percent on the announcement day. A significant part of the variation in abnormal returns can be explained by the ownership structure and by changes in liquidity. Through logit analysis of the unification (here as: st-unfcn.) decision, it is found that firms are more likely to unify if their controlling shareholder loses only little voting power in a st-unfcn. In addition, firms that are financially constrained are more likely to suspend d-c. shares, often issuing additional shares after the st-unfcn. |
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