Behind Broad Corporate Governance Aggregates: A First Look at Single Provisions of the German Corporate Governance Code

48 Pages Posted: 1 Mar 2007 Last revised: 29 Apr 2008

See all articles by Alexander Bassen

Alexander Bassen

University of Hamburg; University of Reading - ICMA Centre

Stefan Prigge

Hamburg School of Business Administration

Christine Zöllner

University of Hamburg

Date Written: April 23, 2008

Abstract

Manuscript Type: Empirical.

Research Question / Issue: This study contributes to the emerging research that analyzes the relation between performance and single components of broad corporate governance aggregates, such as governance codes and ratings. Available research is confined to the U.S., Japan, and emerging markets. We enlarge the geographical scope to the German Corporate Governance Code (GCGC).

Research Findings / Insights: For a sample of 100 large listed German stock corporations, compliance with the GCGC at large is significantly associated only with one of our performance measures (Tobin's q); this connection is negative. Individual analysis of eleven GCGC recommendations reveals that for three of them, association with all performance measures is insignificant. Four (four) components are significantly positively (negatively) connected with at least one performance measure.

Theoretical / Academic Implications: Most remarkably are some significantly negative associations between components and performance. Their existence might explain why the majority of studies fail to find a significant connection between the GCGC at large and performance. As the group of single components found to be significant in the literature is quite inconsistent, further research questions emerge, such as whether there is some stability in the set of significant single components across performance measures, across countries, and through time.

Practitioner / Policy Implications: This study provides new impulse to both commissions setting up governance codes and to commercial providers of governance scores. Given the significantly negative associations we found, an empirical quality inspection of the GCGC at large and of its components is recommended.

Keywords: corporate governance, German Corporate Governance Code, corporate performance

JEL Classification: G34

Suggested Citation

Bassen, Alexander and Prigge, Stefan and Zöllner, Christine, Behind Broad Corporate Governance Aggregates: A First Look at Single Provisions of the German Corporate Governance Code (April 23, 2008). Available at SSRN: https://ssrn.com/abstract=965355 or http://dx.doi.org/10.2139/ssrn.965355

Alexander Bassen

University of Hamburg ( email )

Von-Melle-Park 5
20146 Hamburg
Germany

University of Reading - ICMA Centre ( email )

Whiteknights Park
P.O. Box 242
Reading RG6 6BA
United Kingdom

Stefan Prigge (Contact Author)

Hamburg School of Business Administration ( email )

Alter Wall 38
Hamburg, 20457
Germany

Christine Zöllner

University of Hamburg ( email )

Von-Melle-Park 5
20146 Hamburg
Germany

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