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Universal banking, allocation of control rights, and corporate finance in Germany

Author

Listed:
  • William R. Emmons
  • Frank A. Schmid

Abstract

Corporate governance practices differ greatly in the United States and Germany. This paper describes the main institutional features of the German corporate governance system, focusing on universal banks and codetermination. The paper also summarizes existing empirical evidence that has investigated how- and how well- this system works.

Suggested Citation

  • William R. Emmons & Frank A. Schmid, 1998. "Universal banking, allocation of control rights, and corporate finance in Germany," Working Papers 1998-001, Federal Reserve Bank of St. Louis.
  • Handle: RePEc:fip:fedlwp:1998-001
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    References listed on IDEAS

    as
    1. Franks, Julian & Mayer, Colin, 2001. "Ownership and Control of German Corporations," Review of Financial Studies, Society for Financial Studies, vol. 14(4), pages 943-977.
    2. Grossman, Sanford J. & Hart, Oliver D., 1988. "One share-one vote and the market for corporate control," Journal of Financial Economics, Elsevier, vol. 20(1-2), pages 175-202, January.
    3. Kaplan, Steven N, 1994. "Top Executives, Turnover, and Firm Performance in Germany," Journal of Law, Economics, and Organization, Oxford University Press, vol. 10(1), pages 142-159, April.
    4. Philippe Aghion & Patrick Bolton, 1992. "An Incomplete Contracts Approach to Financial Contracting," Review of Economic Studies, Oxford University Press, vol. 59(3), pages 473-494.
    5. Michael C. Jensen, 2010. "The Modern Industrial Revolution, Exit, and the Failure of Internal Control Systems," Journal of Applied Corporate Finance, Morgan Stanley, vol. 22(1), pages 43-58.
    6. Shleifer, Andrei & Vishny, Robert W, 1997. " A Survey of Corporate Governance," Journal of Finance, American Finance Association, vol. 52(2), pages 737-783, June.
    7. repec:hrv:faseco:30728046 is not listed on IDEAS
    8. FitzRoy, Felix R & Kraft, Kornelius, 1993. " Economic Effects of Codetermination," Scandinavian Journal of Economics, Wiley Blackwell, vol. 95(3), pages 365-375.
    9. Krummel, Hans-Jacob, 1980. "German universal banking scrutinized : Some remarks concerning the Gessler report," Journal of Banking & Finance, Elsevier, vol. 4(1), pages 33-55, March.
    10. Hoshi, Takeo & Kashyap, Anil & Scharfstein, David, 1990. "The role of banks in reducing the costs of financial distress in Japan," Journal of Financial Economics, Elsevier, vol. 27(1), pages 67-88, September.
    11. Jensen, Michael C & Murphy, Kevin J, 1990. "Performance Pay and Top-Management Incentives," Journal of Political Economy, University of Chicago Press, vol. 98(2), pages 225-264, April.
    12. Allen, Franklin & Gale, Douglas, 1995. "A welfare comparison of intermediaries and financial markets in Germany and the US," European Economic Review, Elsevier, vol. 39(2), pages 179-209, February.
    13. Harris, Milton & Raviv, Artur, 1988. "Corporate governance : Voting rights and majority rules," Journal of Financial Economics, Elsevier, vol. 20(1-2), pages 203-235, January.
    14. Rajan, Raghuram G, 1992. " Insiders and Outsiders: The Choice between Informed and Arm's-Length Debt," Journal of Finance, American Finance Association, vol. 47(4), pages 1367-1400, September.
    15. Douglas Gale & Martin Hellwig, 1985. "Incentive-Compatible Debt Contracts: The One-Period Problem," Review of Economic Studies, Oxford University Press, vol. 52(4), pages 647-663.
    16. Steven N. Kaplan & Luigi Zingales, 1997. "Do Investment-Cash Flow Sensitivities Provide Useful Measures of Financing Constraints?," The Quarterly Journal of Economics, Oxford University Press, vol. 112(1), pages 169-215.
    17. Schneider-Lenne, Ellen R, 1992. "Corporate Control in Germany," Oxford Review of Economic Policy, Oxford University Press, vol. 8(3), pages 11-23, Autumn.
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    Citations

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    Cited by:

    1. Edwards, Jeremy S.S. & Weichenrieder, Alfons J., 2009. "Control rights, pyramids, and the measurement of ownership concentration," Journal of Economic Behavior & Organization, Elsevier, vol. 72(1), pages 489-508, October.
    2. Goergen, Marc & Manjon, Miguel C. & Renneboog, Luc, 2008. "Recent developments in German corporate governance," International Review of Law and Economics, Elsevier, vol. 28(3), pages 175-193, September.
    3. Andreani, Ettore, 2003. "Corporate Control and the Financial System in Germany: Recent Changes in the Role of Banks," Thuenen-Series of Applied Economic Theory 37, University of Rostock, Institute of Economics.
    4. Gorton, Gary & Schmid, Frank A., 2000. "Universal banking and the performance of German firms," Journal of Financial Economics, Elsevier, vol. 58(1-2), pages 29-80.
    5. Becht, Marco & Boehmer, Ekkehart, 2003. "Voting control in German corporations," International Review of Law and Economics, Elsevier, vol. 23(1), pages 1-29, March.
    6. Marc Goergen & Miguel Manjon & Luc Renneboog, 2008. "Is the German system of corporate governance converging towards the Anglo-American model?," Journal of Management & Governance, Springer;Accademia Italiana di Economia Aziendale (AIDEA), vol. 12(1), pages 37-71, March.
    7. Elsas, Ralf & Krahnen, Jan Pieter, 2003. "Universal Banks and Relationships with Firms," CFS Working Paper Series 2003/20, Center for Financial Studies (CFS).

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    Keywords

    Germany ; Banks and banking;

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