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Shareholder Value Implications of Compliance with the German Corporate Governance Code
Author(s) -
Kaspereit Thomas,
Lopatta Kerstin,
Onnen Dennis
Publication year - 2017
Publication title -
managerial and decision economics
Language(s) - English
Resource type - Journals
SCImago Journal Rank - 0.288
H-Index - 51
eISSN - 1099-1468
pISSN - 0143-6570
DOI - 10.1002/mde.2750
Subject(s) - corporate governance , german , accounting , commission , valuation (finance) , shareholder , business , shareholder value , capital market , government (linguistics) , value (mathematics) , market value , enterprise value , economics , finance , linguistics , philosophy , archaeology , machine learning , computer science , history
This study contributes to the ongoing discussion of the German Corporate Governance Code (GCGC) of the Regierungskommission Deutscher Corporate Governance Kodex (Government Commission), which should enhance the confidence of national and international investors. We apply the Feltham and Ohlson ([Feltham GA, 1995]) valuation model to a panel dataset of 421 German CDAX firms over the period 2002–2012 and find a positive effect of the level of compliance with the GCGC on the market value of firms. We conclude that the recommendations of the GCGC reflect corporate governance that satisfies investors' needs, as the capital markets perceive them. Our results are in favor of the efforts of the Government Commission, which have attracted criticism from both theorists and practitioners both in the past and at present. From the perspective of managerial and decision economics, the empirical results of this study suggest that executives should follow as many recommendations of the GCGC as possible. Copyright © 2015 John Wiley & Sons, Ltd.