Under German codetermination, firm resources are directed differently. The return on assets and equity decrease, as does the market-to-book ratio.
Firms with equal representation on the supervisory board (parity codetermination) have a 26% decline in market-to-book ratio, compared to firms with one-third representation.
Stock buybacks redirect available cash from investments to repurchase shares, temporarily driving up share prices at the expense of investment.
Codetermination had no significant influence on stock prices of effected firms in Germany.
Co-Determination in Germany: The Impact of Court Decisions on Stock Price
Fighting Short-Termism with Worker Power
Class Struggle Inside The Firm: A Study of German Codetermination
Frank A. Schmid