Economic Consequences of Private Equity Investments on the German Stock Market

41 Pages Posted: 23 Jan 2008 Last revised: 30 Jan 2009

Ann‐Kristin Achleitner

Technische Universität München - Center for Entrepreneurial and Financial Studies

Christian Andres

WHU - Otto Beisheim School of Management

André Betzer

BUW- Schumpeter School of Business and Economics

Charlie Weir

Robert Gordon University - Aberdeen Business School

Date Written: January 30, 2009

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 analyze 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.

Keywords: Private Equity, Corporate Governance, Agency Theory, Event Study

JEL Classification: G14, G32, G34

Suggested Citation

Achleitner, Ann‐Kristin and Andres, Christian and Betzer, André and Weir, Charlie, Economic Consequences of Private Equity Investments on the German Stock Market (January 30, 2009). Available at SSRN: https://ssrn.com/abstract=1086598 or http://dx.doi.org/10.2139/ssrn.1086598

Ann-Kristin Achleitner

Technische Universität München - Center for Entrepreneurial and Financial Studies ( email )

Arcisstr. 21
Munich, D-80290
Germany
+49 89 289 25181 (Phone)

Christian Andres

WHU - Otto Beisheim School of Management ( email )

Burgplatz 2
Vallendar, 56179
Germany

André Betzer

BUW- Schumpeter School of Business and Economics ( email )

Gaußstraße 20
Wuppertal
Germany

HOME PAGE: http://finance.uni-wuppertal.de/index.php?id=1153

Charles Weir (Contact Author)

Robert Gordon University - Aberdeen Business School ( email )

Garthdee Road
RGU
Aberdeen AB10 7QE
United Kingdom
0044 1224 263800 (Phone)
0044 1224 263838 (Fax)

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