Corporate Governance in Germany - The Role of Banks and Ownership of Concentration

German banks do not play a distinctively different corporate governance role from that played by other large shareholders in German industry. High ownership concentration is more important. This new finding appears in a paper by Jeremy Edwards and Marcus Nibler of Cambridge University. Their work appears in the latest edition of Economic Policy published by three major European economic research organisations. The authors find that although banks may influence corporate governance via their control of proxy votes, positions on supervisory boards, and provision of loan finance, in practice they do not play a role in the governance of large German firms which is distinct from that of other types of large shareholder. One unexpected finding is that German firms make little use of bank loan finance. Any superiority of German corporate governance of large firms must therefore be based on high ownership concentration rather than a special role of banks, and must consider the costs of ownership concentration as well as the benefits. The study concludes that ‘the effects of high ownership concentration are not unambiguously positive.’

Notes for Editors:

Economic Policy is published in Association with the European Economic Association by the Centre for Economic Policy Research, the Centre for Economic Studies of the University of Munich and the Département et Laboratoire d’Economie Théorique et Appliquée (DELTA), in collaboration with the Maison des Sciences de l’Homme.

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The Authors:

Jeremy Edwards is in the Department of Economics and Politics at the University of Cambridge and Marcus Nibler is at the University of Cambridge.

Economic Policy Issue 31

Including Jeremy Edwards and Marcus Nibler
Corporate Governance in Germany: the Role of Banks and Ownership Concentration

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