Skip to main content
SpringerLink
Log in

Financial Tunnelling and the Mandatory Bid Rule

  • Articles
  • Published:
European Business Organization Law Review Aims and scope Submit manuscript

Abstract

In this paper, we use case studies to document how dominant shareholders have circumvented mandatory bid rules to appropriate wealth from minority shareholders. Dominant shareholders are numerous in Continental Europe. Creative compliance with mandatory bid rules reveals the failure of boards and regulators to protect minority shareholders and the difficulties of legislating in this area. We propose enhanced means for protecting their interests.

This is a preview of subscription content, log in via an institution to check access.

Access this article

Log in via an institution

Price excludes VAT (USA)
Tax calculation will be finalised during checkout.

Instant access to the full article PDF.

Institutional subscriptions

Similar content being viewed by others

Bibliography

  • Armour, J., and D.A. Skeel, ‘Who Writes the Rules for Hostile Takeovers, and Why? — The Peculiar Divergence of US and UK Takeover Regulation’, 95 Georgetown Law Journal (2007) pp. 1727–1794.

    Google Scholar 

  • Atanasov, V.A., B.S. Black, et al., Unbundling and Measuring Tunneling, University of Texas School of Law, Law and Economics Research Paper 117 (2008).

  • Barclay, M.J., and C.G. Holderness, ‘Private Benefits from Control of Public Corporations’, 25(2) Journal of Financial Economics (1989) pp. 371–395.

    Article  Google Scholar 

  • Bebchuk, L.A., ‘Efficient and Inefficient Sales of Corporate Control’, 109(4) The Quarterly Journal of Economics (1994) pp. 957–993.

    Article  Google Scholar 

  • Citigroup Equity Research, Fiat — Fancy a Punto, 24 August 2005.

  • Coffee, J.C., ‘A Theory of Corporate Scandals: Why the U.S. and Europe Differ’, 21(2) Oxford Review of Economic Policy (2005) pp. 198–211.

    Article  Google Scholar 

  • Drier, M., ‘Tchibo Gets Beiersdorf Stake’, Women’s Wear Daily, 24 October 2003.

  • Dyck, A., and L. Zingales, ‘Private Benefits of Control: An International Comparison’, 59(2) Journal of Finance (2004) pp. 537–600.

    Article  Google Scholar 

  • Enriques, L., ‘The Mandatory Bid Rule in the Proposed EC Takeover Directive: Harmonization As Rent-Seeking?’, in G. Ferrarini, K. Hopt, J. Winter and E. Wymeersch, eds., Reforming Company and Takeover Law in Europe (Oxford, OUP 2003).

    Google Scholar 

  • Faccio, M., and L.H.P. Lang, ‘The Ultimate Ownership of Western European Corporations’, 65(3) Journal of Financial Economics (2002) pp. 365–395.

    Article  Google Scholar 

  • Freshfields, New Issues, December 2001, available at: http://www.freshfields.com/practice/corporate/publications/newsletters/new-issues/2235.pdf.

  • Grant, J., and T. Kirchmaier, ‘Corporate Ownership Structure and Performance in Europe’, 3(2) European Management Review (2005) pp. 231–245.

    Google Scholar 

  • Hoffmann-Buchardi, U., Corporate Governance Rules and the Value of Control — A Study of German Dual-Class Share, Financial Market Group Working Paper No. 0315 (1999).

  • Hu, H.T.C., and B.S. Black, ‘The New Vote Buying: Empty Voting and Hidden (Morphable) Ownership’, 79 Southern California Law Review (2006) pp. 811–908.

    Google Scholar 

  • Johnson, S., R. La Porta, F. Lopez-de-Silanes and A. Shleifer, ‘Tunneling’, 90 American Economic Review (2000) pp. 22–27.

    Article  Google Scholar 

  • Kirchmaier, T., and J. Grant, ‘It’s All Cosmetic: Reform In Germany Is Only Skin-Deep’, Wall Street Journal Europe, 28 January 2004.

  • Nenova, T., ‘The Value of Corporate Voting Rights and Control: A Cross-country Analysis’, 68(3) Journal of Financial Economics (2003) pp. 325–351.

    Article  Google Scholar 

  • Seifert, W.G., and H.-J. Voth, Invasion der Heuschrecken. Intrigen — Machtkämpfe — Marktmanipulation. Wie Hedge Fonds die Deutschland AG attackieren (Econ 2006).

  • Taylor, E., and S. Ellison, ‘With Nivea at Risk, Old German Club Swings into Action’, Wall Street Journal, 19 February 2004.

  • Trias, M., Regulation of Tender Offers in Spain, presentation at Bocconi University, 15 December 2008, available at: http://portale.unibocconi.it/wps/wcm/connect/Centro_BAFFIen/Home/Events/Past+Events.

  • Wood, C., ‘Telecom Italia: Is It Better on Top?’, JP Morgan Securities Research (2002).

  • Zingales, L., ‘Italy Leads in Protecting Minority Investors’, Financial Times, 13 April 2008.

Download references

Author information

Authors and Affiliations

  1. University of Cambridge, USA

    Jeremy Grant

  2. Manchester Business School and Financial Markets Group, London School of Economics, UK

    Tom Kirchmaier

  3. London Business School, UK

    Jodie A. Kirshner

Authors
  1. Jeremy Grant
    View author publications

    You can also search for this author in PubMed Google Scholar

  2. Tom Kirchmaier
    View author publications

    You can also search for this author in PubMed Google Scholar

  3. Jodie A. Kirshner
    View author publications

    You can also search for this author in PubMed Google Scholar

Corresponding author

Correspondence to Tom Kirchmaier.

Additional information

Earlier versions of this paper circulated under the title ‘Financial Tunnelling and the Revenge of the Insider System’. We would like to thank Peter Abell, Bernard Black, Irma Clots-Figueras, Luca Enriques, Rafael Gomez, Christoph Kumpan, Sir Geoffrey Owen, Miguel Segoviano and David Webb for helpful comments on earlier drafts. All remaining errors are our own. The views expressed are purely those of the authors.

Rights and permissions

Reprints and permissions

About this article

Check for updates. Verify currency and authenticity via CrossMark

Cite this article

Grant, J., Kirchmaier, T. & Kirshner, J.A. Financial Tunnelling and the Mandatory Bid Rule. Eur Bus Org Law Rev 10, 233–253 (2009). https://doi.org/10.1017/S156675290900233X

Download citation

  • Published:

  • Issue Date:

  • DOI: https://doi.org/10.1017/S156675290900233X

Keywords

Search

Navigation