Corporate Governance in Germany: Recent Developments and Challenges

Journal of Applied Corporate Finance, Vol. 27, No.4, Fall 2015

HHL Research Paper Series in Corporate Governance No. 13, November 2015

21 Pages Posted: 3 Mar 2016

See all articles by Marc Steffen Rapp

Marc Steffen Rapp

University of Marburg - School of Business & Economics; University of Marburg - Marburg Centre for Institutional Economics (MACIE)

Christian Strenger

DWS Investments; Handelshochschule Leipzig (HHL)

Date Written: November 1, 2015

Abstract

The traditional German corporate governance system has developed against the background of a pay-as-you-go pension system and the consensus-oriented German culture. The system that emerged was characterized by influential banks and bank loans being the main source of outside financing for the corporate sector. However, as the economic and regulatory environment changed over the last 25 years, the corporate sector shifted towards more equity financing, and more generally towards more market-oriented sources of finance. Simultaneously, the banking sector saw major transformations and Germany enacted a series of regulatory initiatives to modernize its corporate governance. As a result, the German corporate governance system developed notably with international and minority shareholder gaining influence at the expense of banks and other insiders. While this development – which is strongly influenced by the Anglo-American governance ideal, but does not simply adopt a market-oriented blueprint – is still ongoing, several open issues with room for improvement remain.

Keywords: Corporate governance, ownership structure, bank influence, board structure, codetermination, Germany

JEL Classification: G20, G32, G38

Suggested Citation

Rapp, Marc Steffen and Strenger, Christian, Corporate Governance in Germany: Recent Developments and Challenges (November 1, 2015). Journal of Applied Corporate Finance, Vol. 27, No.4, Fall 2015 , HHL Research Paper Series in Corporate Governance No. 13, November 2015, Available at SSRN: https://ssrn.com/abstract=2739601

Marc Steffen Rapp (Contact Author)

University of Marburg - School of Business & Economics ( email )

Am Plan 2
Marburg, D-35037
Germany

University of Marburg - Marburg Centre for Institutional Economics (MACIE) ( email )

Am Plan
Marburg, 35032
Germany

Christian Strenger

DWS Investments ( email )

Frankfurt
Germany

Handelshochschule Leipzig (HHL) ( email )

Jahnallee 59
Leipzig, 04109
Germany

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