Challenging Wolf Packs: Thoughts on Efficient Enforcement of Shareholder Transparency Rules

61 Pages Posted: 2 Jul 2009 Last revised: 17 Feb 2010

See all articles by Dirk A. Zetzsche

Dirk A. Zetzsche

Universite du Luxembourg - Faculty of Law, Economics and Finance; European Banking Institute

Date Written: February 4, 2010


Abstract: The key issue concerning shareholder transparency rules, and the related rules on acting in concert (Europe), or the voting group concept (U.S.) is enforcement. Rather than thinking about appropriate enforcement measures, jurisdictions such as the UK and Switzerland decided in favor of Economic Ownership Disclosure. The current debate in the U.S., on the European and national level of some European jurisdictions is moving in the same direction. This article examines a different option which is the better enforcement of existing transparency rules. In order to counter secret acquisition strategies, similar to antitrust leniency and “protected disclosure” (i.e. whistle blowing) rules, governments are best advised to assign a reward for disclosure.

Under the reward model presented here, the initial stock price reaction reflects the value of the information previously hidden from the market. The first participant of a scheme who discloses the holdings of all scheme participants is to be assigned the difference between the price of the target’s voting shares ex ante and ex post disclosure, calculated on the basis of the participants' joint holdings of shares (Announcement Premium). Distinguishing between schemes based on the equity value of the parties involved (Equity Strategy) – commonly referred to as wolf packs - and schemes where an acquirer seeks to create a large stake based on derivatives (Service Strategy), assigning the Announcement Premium to the first entity disclosing the scheme’s holding and intentions is likely to counter Equity Strategies efficiently. The Service Strategy is countered effectively by granting the Announcement Premium to agents that act on behalf of the intermediaries (i.e. to bank employees).

Keywords: Shareholder activism, hedge funds, private equity funds, hidden ownership, empty voting, enforcement, announcement effect, Premium Claim, derivatives, contracts of differences, equity swaps, cartels, leniency, antitrust, takeovers, whistle blowing, protected disclosure, mandatory bid, change of cont

JEL Classification: G14, G21, G23, G24, G34, K21, K22, K42

Suggested Citation

Zetzsche, Dirk Andreas, Challenging Wolf Packs: Thoughts on Efficient Enforcement of Shareholder Transparency Rules (February 4, 2010). CBC-RPS No. 0044/09, Available at SSRN: or

Dirk Andreas Zetzsche (Contact Author)

Universite du Luxembourg - Faculty of Law, Economics and Finance ( email )

Luxembourg, L-1511


European Banking Institute ( email )


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