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Recent developments in German corporate governance.

Goergen, M., Manjon, M.C. and Renneboog, L. (2008) Recent developments in German corporate governance. International Review of Law and Economics, 28 (3). pp. 175-193. ISSN 0144-8188


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This paper provides an overview of the German corporate governance system. We review the governance role of large shareholders, creditors, the product market and the supervisory board. We also discuss the importance of mergers and acquisitions, the market in block trades, and the lack of a hostile takeover market. Given that Germany is often referred to as a bank-based economy, we pay particular attention to the role of the universal banks (Hausbanken). We show that the German system is characterised by a market for partial corporate control, large shareholders and bank/creditor monitoring, a two-tier (management and supervisory) board with co-determination between shareholders and employees on the supervisory board, a disciplinary product-market, and corporate governance regulation largely based on EU directives but with deep roots in the German codes and legal doctrine. Another important feature of the German system is its corporate governance efficiency criterion which is focused on the maximisation of stakeholder value rather than shareholder value. However, the German corporate governance system has experienced many important changes over the last decade. First, the relationship between ownership or control concentration and profitability has changed over time. Second, the pay-for-performance relation is influenced by large shareholder control: in firms with controlling blockholders and when a universal bank is simultaneously an equity- and debtholder, the pay-for-performance relation is lower than in widely-held firms or blockholder-controlled firms. Third, since 1995 several major regulatory initiatives (including voluntary codes) have increased transparency and accountability.

Item Type: Article
Copyright, Publisher and Additional Information: © 2008 Elsevier. This is an author produced version of a paper subsequently published in International Review of Law and Economics. Uploaded in accordance with the publisher's self-archiving policy.
Keywords: Corporate governance, ownership structure, co-determination, mergers and acquisitions, board of directors
Institution: The University of Sheffield
Academic Units: The University of Sheffield > Faculty of Social Sciences (Sheffield) > Sheffield University Management School
Depositing User: Repository Officer
Date Deposited: 31 Oct 2008 13:00
Last Modified: 04 Jun 2014 21:00
Published Version: http://dx.doi.org/10.1016/j.irle.2008.06.003
Status: Published
Publisher: Elsevier
Refereed: Yes
Identification Number: 10.1016/j.irle.2008.06.003
URI: http://eprints.whiterose.ac.uk/id/eprint/4798

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