Does Compliance with the German Corporate Governance Code have an Impact on Stock Valuation? An Empirical Analysis

14 Pages Posted: 17 Sep 2006

See all articles by Igor Goncharov

Igor Goncharov

Lancaster University - Department of Accounting and Finance

Joerg R. Werner

Frankfurt School of Finance & Management gemeinnützige GmbH - Accounting Department

Jochen Zimmermann

University of Bremen - Faculty of Business Studies and Economics; University of Bremen - Chair of Accounting and Control

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Abstract

Since 2002 company law requires listed German corporations to declare their degree of conformity to the German Corporate Governance Code (GCGC). We examine whether there is a pricing effect connected to the declared degree of compliance for a sample of (big) publicly traded German companies listed in the DAX 30 and MDAX. We find that the degree of compliance with the Code is value-relevant after controlling for an endogeneity bias. This shows that the capital markets find the rules in the code meaningful and that there is capital market pressure to adopt the Code regulation. Our findings also suggest that the capital market fills a possible control vacuum resulting from the withdrawal of commercial banks from their (former) influential role in the German insider control corporate governance model.

Suggested Citation

Goncharov, Igor and Werner, Jörg Richard and Zimmermann, Jochen, Does Compliance with the German Corporate Governance Code have an Impact on Stock Valuation? An Empirical Analysis. Corporate Governance: An International Review, Vol. 14, No. 5, pp. 432-445, September 2006. Available at SSRN: https://ssrn.com/abstract=930767 or http://dx.doi.org/10.1111/j.1467-8683.2006.00516.x

Igor Goncharov (Contact Author)

Lancaster University - Department of Accounting and Finance ( email )

The Management School
Lancaster LA1 4YX
United Kingdom

Jörg Richard Werner

Frankfurt School of Finance & Management gemeinnützige GmbH - Accounting Department ( email )

Adickesallee 32-34
Frankfurt, 60322
Germany

Jochen Zimmermann

University of Bremen - Faculty of Business Studies and Economics ( email )

Hochschulring 4
Germany
+49 421 218 9121 (Phone)

University of Bremen - Chair of Accounting and Control ( email )

Universitaetsallee GW I
Bremen, D-28334
Germany
+49 421 218-9119 (Phone)

HOME PAGE: http://www.controlling.uni-bremen.de

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