The Impact of a Break-Through Rule on European Firms

We analyze the impact of a 75 pct. Break-Through rule on 1,035 European firms with dual class shares. In 3–5 pct. of the firms the controlling owners incur a direct loss of control, while in another 11–17 pct. of the firms, the controlling owners are likely to incur a loss of control. Firms in Germany, Italy and the Scandinavian countries are more likely to incur a loss of control. The restrictions that the Break-Through rule put on the ability of these firms to issue new shares to outsiders without changing the control structure are also estimated. We conclude that a significant number of firms with dual class shares in the European Union will be affected by a 75 pct. Break-Through rule.