Financial tunnelling and the revenge of the insider system: how to circumvent the new European corporate governance legislation

Kirchmaier, Thomas ORCID: 0000-0002-8938-2206 and Grant, Jeremy (2005) Financial tunnelling and the revenge of the insider system: how to circumvent the new European corporate governance legislation. Financial Markets Group Discussion Papers (536). Financial Markets Group, The London School of Economics and Political Science, London, UK.

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Abstract

In this paper, we document how European companies can use financial tunnelling to the disadvantage of minority shareholders, despite improved legislation directed at eliminating such activities. In four case studies, two German and two Italian, we document how newly established corporate governance standards were successfully circumvented by dominant shareholders, major financial institutions, politicians, and in the worst case the regulator. These cases demonstrate that for effective Corporate Governance to work, one not only has to change the law, but even more importantly, one has to ensure the widespread acceptance of new rules. The litmus test of corporate governance reforms in any country is whether the rules are applied objectively in situations where powerful elites perceive they are disadvantaged under the new regulations.

Item Type:	Monograph (Discussion Paper)
Official URL:	http://fmg.ac.uk
Additional Information:	© 2005 The Authors
Divisions:	Financial Markets Group Centre for Economic Performance
Subjects:	H Social Sciences > HG Finance
JEL classification:	G - Financial Economics > G3 - Corporate Finance and Governance > G34 - Mergers; Acquisitions; Restructuring; Corporate Governance G - Financial Economics > G3 - Corporate Finance and Governance > G32 - Financing Policy; Financial Risk and Risk Management; Capital and Ownership Structure
Date Deposited:	23 Oct 2008 13:39
Last Modified:	13 Sep 2024 19:55
URI:	http://eprints.lse.ac.uk/id/eprint/13324

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