Antecedents and consequences of corporate governance reform: the case of Germany
Version of Record online: 23 APR 2003
Copyright © 2003 John Wiley & Sons, Ltd.
Strategic Management Journal
Volume 24, Issue 7, pages 631–649, July 2003
How to Cite
Tuschke, A. and Gerard Sanders, Wm. (2003), Antecedents and consequences of corporate governance reform: the case of Germany. Strat. Mgmt. J., 24: 631–649. doi: 10.1002/smj.324
- Issue online: 22 MAY 2003
- Version of Record online: 23 APR 2003
- Manuscript Revised: 5 FEB 2003
- Manuscript Received: 13 MAY 2002
- corporate governance;
- ownership structure;
- firm performance
The paper examines the antecedents and consequences of the voluntary adoption of corporate governance reform in firms embedded in a relationship-based governance system with less protection of minority shareholders. In such locations, ownership structure should be a key determinant of governance reform. Firms with dispersed ownership are likely to face agency problems but may lack sufficient ownership power in the hand of external owners for adoption to occur. Extensive ownership by external parties facilitates adoption but decreases the need and motivation to adopt governance reform. We examined the adoption of stock-based incentive plans and transparent accounting regulations (e.g., greater disclosure to shareholders) among large German firms (DAX 100) during the late 1990s. We found an inverse ‘U’-shaped relationship between ownership concentration and governance reform. In addition, we found that firms adopting governance reform were more likely to engage in corporate divestitures and achieve higher levels of market performance than firms not adopting governance reform. Copyright © 2003 John Wiley & Sons, Ltd.