The Role of Accounting in the German Financial System

51 Pages Posted: 21 Sep 2003  

Christian Leuz

University of Chicago - Booth School of Business; National Bureau of Economic Research (NBER); European Corporate Governance Institute (ECGI); Center for Financial Studies (CFS); University of Pennsylvania - Wharton Financial Institutions Center; CESifo Research Network

Jens Wüstemann

University of Mannheim - Accounting and Taxation

Date Written: June 2003

Abstract

This paper describes and analyzes the role of financial accounting in the German financial system. It starts from the common (international) perception that German accounting is rather uninformative. This characterization has its merits from the perspective of an arm's length or outside investor and when confined to the financial statements per se. But it is no longer accurate when a broader perspective is adopted. The German accounting system exhibits several arrangements that privately communicate information to insiders, notably the supervisory board. Due to these features, the key financing and contracting parties seem reasonably well informed. The same cannot be said about outside investors relying primarily on public disclosure. A descriptive analysis of the main elements of the Germany system and a survey of extant empirical accounting research generally support these arguments.

Keywords: Accounting, Disclosure, Germany, Standards, Survey

JEL Classification: M41, M47, G34, D82, K22

Suggested Citation

Leuz, Christian and Wüstemann, Jens, The Role of Accounting in the German Financial System (June 2003). CFS Working Paper No. 2003/16. Available at SSRN: https://ssrn.com/abstract=427000 or http://dx.doi.org/10.2139/ssrn.427000

Christian Leuz (Contact Author)

University of Chicago - Booth School of Business ( email )

5807 S. Woodlawn Avenue
Chicago, IL 60637
United States
773-834-1996 (Phone)

HOME PAGE: http://faculty.chicagobooth.edu/christian.leuz/

National Bureau of Economic Research (NBER) ( email )

1050 Massachusetts Avenue
Cambridge, MA 02138
United States

HOME PAGE: http://www.nber.org

European Corporate Governance Institute (ECGI)

Brussels
Belgium

HOME PAGE: http://www.ecgi.org

Center for Financial Studies (CFS) ( email )

Grüneburgplatz 1
Frankfurt am Main, 60323
Germany

University of Pennsylvania - Wharton Financial Institutions Center

3641 Locust Walk
Philadelphia, PA 19104-6218
United States

CESifo Research Network

Poschinger Str. 5
Munich, DE-81679
Germany

Jens Wüstemann

University of Mannheim - Accounting and Taxation ( email )

Mannheim, 68131
Germany

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