European Capital Markets and Corporate Control

Abstract

Abstract This chapter is about capital markets and corporate control. It is concerned with the way in which capital markets _exert control over the management and operations of firms. Corporate control is generally associated with take-overs. In the UK and the US take-overs are regarded as a central function of stock markets. The take-over process acts as a discipline on firms allowing control to be transferred from inefficient to efficient management and encouraging a convergence of interests between management and shareholders. Elsewhere in Europe, less emphasis is placed on the role of take-overs in changing corporate control. Stock markets are often much smaller and their role is not perceived as being one of disciplining management. Instead, banks, families, and sometimes the State have controlling shareholdings that impede the take-over process. There are therefore different methods of changing corporate control in Europe.