Financial Tunnelling and the Mandatory Bid Rule

Abstract

In this paper we use clinical 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.

Keywords: mandatory bid Rule, MBR, minority shareholders, financial tunneling, block holder, corporate governance

JEL Classification: G34, G32