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Corporate Governance in Germany: Recent Developments and Challenges
Author(s) -
Rapp Marc Steffen,
Strenger Christian
Publication year - 2015
Publication title -
journal of applied corporate finance
Language(s) - English
Resource type - Journals
eISSN - 1745-6622
pISSN - 1078-1196
DOI - 10.1111/jacf.12142
Subject(s) - corporate governance , german , management , corporate law , political science , economics , history , archaeology
The traditional German corporate governance system has developed against the background of a pay-as-you-go pension system and the consensus-oriented German culture. The system that emerged was characterized by influential banks and bank loans being the main source of outside financing for the corporate sector. However, as the economic and regulatory environment changed over the last 25 years, the corporate sector shifted towards more equity financing, and more generally towards more market-oriented sources of finance. Simultaneously, the banking sector saw major transformations and Germany enacted a series of regulatory initiatives to modernize its corporate governance. As a result, the German corporate governance system developed notably with international and minority shareholder gaining influence at the expense of banks and other insiders. While this development – which is strongly influenced by the Anglo-American governance ideal, but does not simply adopt a market-oriented blueprint – is still ongoing, several open issues with room for improvement remain.