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Does Compliance with the German Corporate Governance Code Have an Impact on Stock Valuation? An empirical analysis

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Author Info

  • Igor Goncharov

    (Universiteit van Amsterdam)

  • Joerg Richard Werner
  • Jochen Zimmermann

    (University of Bremen (Germany))

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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. Copyright (c) 2006 The Authors; Journal compilation (c) 2006 Blackwell Publishing Ltd.

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    Bibliographic Info

    Article provided by Wiley Blackwell in its journal Corporate Governance: An International Review.

    Volume (Year): 14 (2006)
    Issue (Month): 5 (09)
    Pages: 432-445

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    Handle: RePEc:bla:corgov:v:14:y:2006:i:5:p:432-445

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    Web page: http://www.blackwellpublishing.com/journal.asp?ref=0964-8410&site=1

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    Web: http://www.blackwellpublishing.com/journal.asp?ref=0964-8410&site=1

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    Cited by:
    1. David Seidl & Paul Sanderson & John Roberts, 2009. "Applying 'Comply-or-Explain': Conformance with Codes of Corporate Governance in the UK and Germany," ESRC Centre for Business Research - Working Papers wp389, ESRC Centre for Business Research.
    2. George Iatridis, Panayotis Alexakis, 2012. "Evidence of voluntary accounting disclosures in the Athens Stock Market Purpose – The purpose of this paper is to explore the motives for providing voluntary accounting disclosures and investigate t," Review of Accounting and Finance, Emerald Group Publishing, vol. 1(1), pages 73-92, February.
    3. Tariq, Yasir Bin & Abbas, Zaheer, 2013. "Compliance and multidimensional firm performance: Evaluating the efficacy of rule-based code of corporate governance," Economic Modelling, Elsevier, vol. 35(C), pages 565-575.
    4. Fülbier, Rolf Uwe & Klein, Malte, 2013. "Financial accounting and reporting in Germany: A case study on German accounting tradition and experiences with the IFRS adoption," Bayreuth Working Papers on Finance, Accounting and Taxation (FAcT-Papers) 2013-01, University of Bayreuth, Chair of Finance and Banking.
    5. David Seidl & Paul Sanderson & John Roberts, 2013. "Applying the ‘comply-or-explain’ principle: discursive legitimacy tactics with regard to codes of corporate governance," Journal of Management and Governance, Springer, vol. 17(3), pages 791-826, August.

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