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The role of accounting in the German financial system

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  • Leuz, Christian
  • Wüstemann, Jens

Abstract

This chapter analyzes the role of financial accounting in the German financial system. It starts from the common perception that German accounting is rather 'uninformative'. This characterization is appropriate from the perspective of an arm's length or outside investor and when confined to the financial statements per se. But it is no longer accurate when a broader perspective is adopted. The German accounting system exhibits several arrangements that privately communicate information to insiders, notably the supervisory board. Due to these features, the key financing and contracting parties seem reasonably well informed. The same cannot be said about outside investors relying primarily on public disclosure. A descriptive analysis of the main elements of the Germany system and a survey of extant empirical accounting research generally support these arguments.

Suggested Citation

  • Leuz, Christian & Wüstemann, Jens, 2003. "The role of accounting in the German financial system," CFS Working Paper Series 2003/16, Center for Financial Studies (CFS).
    • Handle: RePEc:zbw:cfswop:200316
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    Cited by:

    1. Wüstemann, Jens, 2004. "Evaluation and Response to Risk in International Accounting and Audit Systems: Framework and German Experiences," Sonderforschungsbereich 504 Publications 04-20, Sonderforschungsbereich 504, Universität Mannheim;Sonderforschungsbereich 504, University of Mannheim.
    2. Rahman, Asheq & Yammeesri, Jira & Perera, Hector, 2010. "Financial reporting quality in international settings: A comparative study of the USA, Japan, Thailand, France and Germany," The International Journal of Accounting, Elsevier, vol. 45(1), pages 1-34, March.
    3. Franzke, Stefanie A. & Grohs, Stefanie & Laux, Christian, 2003. "Initial public offerings and venture capital in Germany," CFS Working Paper Series 2003/26, Center for Financial Studies (CFS).
    4. Noriyuki Tsunogaya & Parmod Chand, 2012. "The Complex Equilibrium Paths towards International Financial Reporting Standards (IFRS) and the Anglo-American Model: The Case of Japan," The Japanese Accounting Review, Research Institute for Economics & Business Administration, Kobe University, vol. 2, pages 117-137, December.
    5. Bernard, Darren & Kaya, Devrimi & Wertz, John, 2021. "Entry and capital structure mimicking in concentrated markets: The role of incumbents’ financial disclosures," Journal of Accounting and Economics, Elsevier, vol. 71(2).
    6. Massimiliano Bonacchi & Antonio Marra & Paul Zarowin, 2019. "Organizational structure and earnings quality of private and public firms," Review of Accounting Studies, Springer, vol. 24(3), pages 1066-1113, September.
    7. repec:dau:papers:123456789/3507 is not listed on IDEAS
    8. repec:dau:papers:123456789/2814 is not listed on IDEAS
    9. Wüstemann, Jens, 2004. "Disclosure regimes and corporate governance," Papers 04-11, Sonderforschungsbreich 504.
    10. Wüstemann, Jens, 2004. "Evaluation and response to risk in international accounting and audit systems : framework and German experiences," Papers 04-20, Sonderforschungsbreich 504.
    11. Christian Gross, 2016. "The Effect of the German Accounting Law Modernization Act on the Comparability of Private Local GAAP and IFRS Firms," Schmalenbach Business Review, Springer;Schmalenbach-Gesellschaft, vol. 17(3), pages 423-460, December.
    12. Inge Wulf & Jens Niemöller & Natalia Rentzsch, 2014. "Development toward integrated reporting, and its impact on corporate governance: a two-dimensional approach to accounting with reference to the German two-tier system," Journal of Management Control: Zeitschrift für Planung und Unternehmenssteuerung, Springer, vol. 25(2), pages 135-164, October.

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    More about this item

    Keywords

    Accounting; Disclosure; Germany; Standards; Survey;
    All these keywords.

    JEL classification:

    • M41 - Business Administration and Business Economics; Marketing; Accounting; Personnel Economics - - Accounting - - - Accounting
    • G3 - Financial Economics - - Corporate Finance and Governance
    • D82 - Microeconomics - - Information, Knowledge, and Uncertainty - - - Asymmetric and Private Information; Mechanism Design
    • K0 - Law and Economics - - General

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