Corporate Governance in Germany: The Role of Banks and Ownership Concentration

Posted: 18 Apr 2001

See all articles by Jeremy Edwards

Jeremy Edwards

University of Cambridge - Faculty of Economics and Politics; CESifo (Center for Economic Studies and Ifo Institute)

Marcus Nibler

University of Cambridge

Abstract

The German system of corporate governance is often thought to be effective at addressing problems arising in large firms. In addition to the usual emphasis on the role of German banks, it is increasingly recognized that the German system also involves a high concentration of the ownership of large firms. We analyse the relative significance of these two features of the German system and conclude that high ownership concentration is more important. Although banks may influence corporate governance via their control of proxy votes, positions on supervisory boards, and provision of loan finance, in practice they do not play a role in the governance of large German firms which is distinct from that of other types of large shareholders. Any case for the superiority of German corporate governance of large firms must therefore be based on high ownership concentration rather than a special role of banks, and must consider the costs of ownership concentration as well as the benefits.

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Suggested Citation

Edwards, Jeremy and Nibler, Marcus, Corporate Governance in Germany: The Role of Banks and Ownership Concentration. Economic Policy, Vol. 15, No. 31, October 2000. Available at SSRN: https://ssrn.com/abstract=247410

Jeremy Edwards (Contact Author)

University of Cambridge - Faculty of Economics and Politics ( email )

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CESifo (Center for Economic Studies and Ifo Institute)

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Munich, DE-81679
Germany

HOME PAGE: http://www.CESifo.de

Marcus Nibler

University of Cambridge

Trinity Ln
Cambridge, CB2 1TN
United Kingdom

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