ارزش سهامداران و معدن: اثرات ثروت تصرف در معدن زغال سنگ آلمان، 1896-1913

We investigate the wealth effects of takeovers in the mining industry of the German Ruhr district between 1896 and 1913. We employ event study methodology and use a new data set that covers stock prices of joint-stock mining companies and information on share prices of Gewerkschaften, an organisational form that was exclusively designed for German mining companies. Our empirical results show that takeovers enhanced shareholder value. The clear beneficiaries were the owners of the acquired companies, those of the acquirers hardly gained significantly. Collusion in the mining industry benefited the shareholders of small, poorly performing takeover targets.

The accepted view on the economy of Imperial Germany holds that there existed a peculiar German business model—sometimes labelled as “organised capitalism” (Kocka, 1974) or “cooperative capitalism” (Chandler, 1990)—that was characterised by dominant joint-stock credit banks, tariffs, and concentration through cartels and other collusive arrangements rather than through mergers, acquisitions, and trust building. Consequently, takeover activity is regarded as a marginal phenomenon that was more symptomatic for the Anglo-American than for the German way of doing business. This view on German economic history has also shaped cliometric research in the field. As a result, there are numerous—partly conflicting—studies on the role of the joint-stock credit banks (Becht and Ramirez, 2003, Burhop, 2006, Edwards and Ogilvie, 1996 and Fohlin, 2007) and also a growing amount of investigations into cartels (Bittner, 2005, Kinghorn and Nielsen, 2004, Peters, 1989 and Webb, 1980) and tariffs (Webb, 1980 and Webb, 1982). In contrast, for a long time the only cliometric study on takeovers has been Tilly’s (1982) seminal work on the role and the determinants of external growth in Germany between 1880 and 1913. Only recently, additional evidence was produced. Kling, 2006a and Kling, 2006b studies the short-term wealth effects of mergers in 1908 as well as the long-term wealth effects and the determinants of takeovers that took place between 1870 and 1913. In our study, we look at the external growth of publicly owned companies in the mining industry of Imperial Germany. More specifically, we examine 21 acquiring and 23 acquired companies from the most important of Germany’s coal mining areas, the Ruhr district. The investigation period ranges from the second half of the 1890s up to the First World War. By the choice of this period, we cover the years with the most intense takeover activity in the mining industry of the Ruhr district (see Fig. 1 in Section 2) as well as in the German economy as a whole (Kling, 2006b). The main focus of the study is on the wealth effects of external growth and the distribution of potential wealth gains and losses. Thus, we use event study methodology and cross-sectional regressions.

The aim of this study was to contribute to the economic historiography of Imperial Germany by providing empirical evidence on the wealth effects of takeovers in the mining industry of the Ruhr district between 1896 and 1913. We found that they were shareholder value-enhancing. The owners of targeted joint-stock companies realised positive and significant ARs and CARs, while those of acquiring joint-stock companies hardly gained. By and large, these findings also hold for Gewerkschaften and the Kux market. Although they were in many ways different from joint-stock companies and stock exchanges, the observed patterns are qualitatively congruent. Quantitatively, the shareholders of targeted Gewerkschaften gained significantly more than those of acquired joint-stock companies. We also inferred conclusions about the wealth effects of cartel-driven takeovers. The shareholders of the—often poorly performing—targets in these acquisitions were given a premium. Thus, one important effect of cartelisation presumably was to make market consolidation palatable for the owners of failing or failed companies. With regard to the literature on the wealth effects of takeovers in general and those in Imperial Germany in particular, we are left with an ambiguous picture. On the one hand, the overwhelming majority of our empirical findings is both qualitatively and quantitatively consistent with modern event studies as well as with those that use historical data from the United States. On the other hand, it seems harder to reconcile our results with the findings in Kling’s (2006a) study on takeover gains in Imperial Germany. In particular, he concludes that the ‘merger paradox’ must be rejected for Imperial Germany, as he finds that takeover gains were distributed to the shareholders of the targets and the bidders. Based on our empirical results, we cannot argue in this direction with the same rigour. Two explanations for the different results of Kling’s and our study come to mind. At first, it is well possible that Kling overstates the extent to which agency problems in the 19th and early 20th century were alleviated. The assertion that managers in Imperial Germany were more tightly controlled by majority shareholders, proactive supervisory boards, and integration through cross-shareholding than nowadays and that they possessed large stakes in their companies are often brought forward in the discussion of the German corporate governance regime. However, the empirical evidence for all these statements is extremely thin and in many cases, open for alternative interpretations. For example, quantitative information on shareholding by managers is almost not existent and the anecdotic evidence that is on hand for the mining industry in the Ruhr district suggests that some of its most powerful managers owned only very limited amounts of their companies’ stocks36. The same holds for majority shareholders, shareholding by members of supervisory boards, and cross-shareholding.37 The shortcoming of the aforementioned interpretation is that it can explain why we failed to convincingly reject the ‘merger paradox’, but that it does not explain why Kling’s findings for the economy as a whole are different. To overcome this shortcoming, we introduce the second explanation, namely that the market structure effect of takeovers in the mining industry of the Ruhr district was different from the rest of the economy, although the legal environment (i.e., no merger control) was identical. The mining industry in the Ruhr district has been tightly cartelised in the years under investigation. As a result, an almost perfect monopoly was already existing and mergers between cartel members could have hardly increased mark-ups. In this context, the fact that cartel quotas and voting rights in the general assembly of the RWKS depended on the size of a company’s output seems negligible, as for all the takeovers between cartel members that took place, output and thus also voting rights remained highly unconcentrated throughout our investigation period.38