The Disappearing 'Deutschland AG' - An Analysis of Blockholdings in German Large Caps

Abstract

The German corporate governance system changed substantially over the last ten years. Meanwhile, ownership structures of German firms changed significantly. We examine the phenomenon of changing ownership structures by studying blockholdings of German large caps between 1997 and 2006. We examine the dynamics of blockholdings by analyzing the evolution of free float and block trades, where at least 5% of voting rights change hands. Two findings emerge: First, we find that free float increases from 65% in 1997 to 75% in 2006, mainly caused by German financials and German government entities. Simultaneously, we observe a surprisingly high number of block trades: on average 1.6 block trades per firm from 1997 to 2006. Second, we find that particularly individuals and German industrials are guarantors for a stable ownership structure. German financials or German government entities as blockowners increase the free float and the likelihood of block trades. Moreover, block trades are more likely to occur in firms having foreign investors as owners. Our findings are of interest with respect to the evolution of the so-called ‘Deutschland AG’ but also with respect to the current anchor shareholder discussion.