Financial distress, corporate control,and management turnover

In this study we empirically investigate the effect of financial distress on cor-porate ownership and control. Our analysis is based on a panel of 267 Germanfirms that suffered from repeated interest coverage shortfalls and steep share pricedeclines between 1996 and 2004. We track each firm's development over the dis-tress cycle with particular attention on corporate ownership, restructuring, andmanagement turnover. We find a significant decrease in ownership concentration.Private investors, typically the bulwark in corporate ownership structures in Ger-many, gradually relinquish their dominating role and thereby cease to be an effectivesource of managerial control.[...]