Capitalism and the Daimler-Chrysler Merger Saga

In a new departure for Learning from Dogs, Sherry Jarrell publishes a three-part article on the Daimler-Chrysler merger.  Learning from Dogs is indebted to Professor Jarrell for both giving so freely of her time to the Blog and for sharing such erudite material.

Here is Part One

What does the Daimler-Chrysler merger demonstrate in broader terms?

In a paper co-authored with Rick Harris, Tom McInish and Bob Wood, we explored the Daimler-Chrysler merger of 1998 to examine the interplay between disclosure rules in the U.S. and corporate governance standards in Germany.  Here is an overview of what we found.

Large shareholders typically control European and Asian industrial giants, leaving minority shareholders less than well protected.  In several studies of the legal protection afforded minority shareholders across 27 countries, German shareholder protection ranked among the very worst. In the early 1990s, Daimler-Benz, one of the largest firms in Germany, was no exception.  In 1993, with Deutsche Bank owning 24% of the equity, Mercedes AG Holding 25%, and the Emirate of Kuwait 14%, its controlling shareholders decided to cross-list Daimler-Benz on the New York Stock Exchange (NYSE).

1997 Daimler Mercedes

All foreign firms that cross-list [list their shares for sale in more than one country] in the U.S. subject themselves to stricter disclosure standards.    In addition to listing on a major U.S. stock exchange, Daimler was required to file financial statements with the SEC and report any material non-financial information as well.   Cross-listed firms are also followed more closely by U.S. stock analysts and the business press.  These legal disclosure requirements and additional scrutiny by the investing community improved both the quantity and quality of information available to all shareholders about Daimler.

1997 Chrysler Town and Country Minivan

By early 1998, the cross-listed Daimler shares were widely held and actively traded worldwide, including significant volume originating in the United States. In September of 1998, Daimler and Chrysler shareholders, majority and minority owners alike, overwhelmingly approved a merger creating DaimlerChrysler AG (DCX) through an exchange of the cross-listed share for the first “global registered share” (GRS).  The so-called “merger of equals” was widely expected to realize both operating efficiencies and, via the informational transparency of the GRS, improved access to international capital markets.

By Sherry Jarrell – Part Two continues tomorrow.

8 thoughts on “Capitalism and the Daimler-Chrysler Merger Saga

  1. The supposed 1997 Mercedes in the picture looks suspiciously to me like a Jag. But that’s just me: suspicious, nitpicking, and partial to Peugeots and Beemers, which are much better cars with thus more discerning owners, I would bodly surmise…

    Like

      1. It is Daimler but working under cover …..

        as for “for what it’s worth”, we could always organise a vote …

        I certainly won’t subject MYSELF to a vote!!

        Like

    1. That is a Jaguar. The people at Daimler-Benz would have a heart attack if saw this vehicle. I know, I use to work for them.

      Like

  2. Morning Sherry,

    By chance I was a Captain working for Daimler Chrysler on the Airbus shuttle from Stuttgart to Pontiac, for three years, coming up to the time the “two companies” parted.

    I,ll see the next instalment, and see if I can add another dimension

    Have a god day.

    Bob

    Like

    1. Very interesting. I learned more than I could publish in the academic press, and the “rest of the story” is very intriguing indeed. I am glad that decisions based on hubris fail to carry the day in the end!

      Hope all is well!

      Sherry

      Like

Leave a Reply

Fill in your details below or click an icon to log in:

WordPress.com Logo

You are commenting using your WordPress.com account. Log Out /  Change )

Google photo

You are commenting using your Google account. Log Out /  Change )

Twitter picture

You are commenting using your Twitter account. Log Out /  Change )

Facebook photo

You are commenting using your Facebook account. Log Out /  Change )

Connecting to %s

This site uses Akismet to reduce spam. Learn how your comment data is processed.