Changing Law and Ownership Patterns in Germany: Corporate Governance and the Erosion of Deutschland AG

57 Pages Posted: 23 Jun 2014 Last revised: 8 Apr 2015

See all articles by Wolf-Georg Ringe

Wolf-Georg Ringe

University of Hamburg - Institute of Law & Economics; University of Oxford - Faculty of Law; European Corporate Governance Institute (ECGI)

Date Written: March 2015

Abstract

German corporate governance and corporate law are currently undergoing a major change. The old “Deutschland AG”, a nationwide network of firms, banks, and directors, is eroding, ownership is diffusing and the shareholder body is becoming more international than ever. This paper presents new data to support this development and explores the consequences in governance and in law that have been taken or that need to be drawn from this finding. Consistent with market-based theoretical accounts on corporate law, it finds that the changes currently underway are mainly a response to global market pressure: German banks divested their equity stakes mainly as a consequence of increased international competition.

The paper extends the model of market-led change by two important observations: first, market pressure is not the only driver of legal change, but the law itself in this case contributed to facilitating competition. Notably, a taxation law reform enabled and accelerated the competition process already underway. Legal rules and market competition may thus be understood as not operating in isolation, but as forces that can be working in dialog. Secondly, the paper highlights the importance of ownership structure as an important intermediate condition in the logical order between market competition and legal change.

Keywords: corporate governance, shareholders, Germany, dispersion of ownership, market-based legal change

JEL Classification: G32, G38, K22, K34

Suggested Citation

Ringe, Wolf-Georg, Changing Law and Ownership Patterns in Germany: Corporate Governance and the Erosion of Deutschland AG (March 2015). American Journal of Comparative Law, Forthcoming; Oxford Legal Studies Research Paper No. 42/2014. Available at SSRN: https://ssrn.com/abstract=2457431 or http://dx.doi.org/10.2139/ssrn.2457431

Wolf-Georg Ringe (Contact Author)

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