"Corporate Governance in Germany: Institutional Background and
Empirical Results"
BY: EKKEHART BOEHMER
Humboldt-Universitat zu Berlin
Document: Available from the SSRN Electronic Paper Collection:
http://papers.ssrn.com/paper.taf?abstract_id=157823
Contact: EKKEHART BOEHMER
Email: Mailto:boehmer at wiwi.hu-berlin.de
Postal: Humboldt-Universitat zu Berlin
Spandauer Str. 1
Berlin 10178, GERMANY
Phone: +49 (30) 2093-5661
Fax: +49 (30) 2093-5666
ABSTRACT:
I survey empirical studies on German corporate governance and
conclude that they raise intriguing questions for future
research and have important political implications. First,
current German transparency legislation (WpHG) is not adequate
to achieve the objective of transparency as stated by the
European Commission and the German Parliament. Compared to other
developed economies, the German stock market is dominated by
large shareholders. However, even after introducing the WpHG in
1995, the ultimately controlling parties are often not disclosed
and transfers from smaller shareholders are legally possible.
Second, due to proxy votes and board memberships, banks control
a substantially higher fraction of voting rights than cash-flow
claims. Moreover, banks extend more loan money to the typical
firm than they hold as equity. Consequently, it is unclear
whether their voting power is used in the interest of
shareholders. Empirically, bank involvement appears to have a
very limited effect on performance. Several open questions
remain to assess the efficacy of the German model in relation to
more market-based systems.
JEL Classification: G34, K22, G15