Co-Determination in Germany: The Impact of Court Decisions on Stock Price

"The event study examines the impact of decisions of German courts during the period 1974-1995 on co-determination issues on the stock price developments of the firms concerned. The authors find that the stock market did not react in a significant way. In a second step the authors ask whether the introduction of the Co-determination Act of 1976 and the ruling of the Federal Constitutional Court of March 1, 1979 on the constitutionality of that Act had any influence on stock prices in those sectors that were most heavily affected by these events. Here also the results are negative. The authors discuss possible explanations."