Protection of domestic bank ownership in France and Germany: The functional equivalency of institutional diversity in takeovers

Abstract

We investigate in this article the character of the market for corporate control (i.e. takeovers) in French and German banking. Its key feature is the marked ability of French and German banks to resist unsolicited takeover bids especially, although not exclusively, those from foreign competitors. We present an institutional perspective to account for the restrained character of takeovers in French and German banking. Our perspective is composed of two elements. First, institutional arrangements are important since they structure power relations among firm stakeholders by providing opportunities, as well as imposing constraints, to influence the decision-making process in which takeover transactions take place. Second, institutional arrangements provide firm stakeholders with several, not just one, potential opportunities to block unsolicited bids since takeover contests are composed of sequences of decisions for which approval is needed at each stage. French and German banks have used different mixes of institutional arrangements, themselves located at different stages of takeover transactions, to secure restrained markets for corporate control. Our institutional analysis, in turn, also illustrates an important shortcoming of banking sector protectionism, namely the contribution of protection from unsolicited takeover bids to the building of banks carrying systemic risks.

Industrial policy and comparative political economy: A literature review and research agenda

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The management of the Eurozone in crisis times: Actors, institutions and the case of bailout packages

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