Germany's repeal of the corporate capital gains tax: the equity market response.

ABSTRACT: In late 1999 the German rule made a surprise announcement that it would repeal the large and long-standing capital gains tax upon sales of corporate crossholdings effective in 2002 The repeal has been hailed as a revolutionary pace toward breaking up the extensive web of crossholdings among German companies. The lock-in issue from the large corporate capital gains tax was said to act as a barrier to efficient acquisition and divestiture of German firms and divisions. Many on-lookers predicted that once the lock-in result was removed, Germany would experience a