Unintented consequences of German stock delisting legislation

Michael Florig (michael.florig@polytechnique.edu) and Olivier Gossner (olivier.gossner@polytechnique.edu)
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Michael Florig: Economics Department, Ecole Polytechnique
Olivier Gossner: CNRS-CREST, Ecole Polytechnique and London School of Economics

No 2023-01, Working Papers from Center for Research in Economics and Statistics

Abstract: The German stock exchange act enables a company’s management to delist the shares without shareholder consent, provided a sponsor of the delisting offers to acquire outstanding shares at a price equal to at least a six month average of the share price. We capture the economic impact of this legislation in a model in which management has the option to delist the stock after public release of information. Delistings are likely to follow positive news on the asset value, which depresses the stock value even before information is released. This makes the option to delist even more attractive and generates a downwards self-reinforcing loop on stock price. Such unintended consequences of the legislation could be mitigated via mandatory shareholder consent, similar to the current French or UK legislation, by giving minority shareholders an appraisal right as in the US, or by requiring an independent expert evaluation.

Keywords: delisting; stock valuation (search for similar items in EconPapers)
JEL-codes: G12 G13 G14 G30 K20 (search for similar items in EconPapers)
Pages: 21 pages
Date: 2023-01-03
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