Few areas of business economics are discussed in such a controversial manner as different corporate governance systems. In a globalized age in which the capital markets of industrialized countries have a large operating range and a growing degree of internationalization, the design and regulation activities in this field have become increasingly important. This has triggered a "competition of institutions".
In the current academic discussion, different corporate governance paradigms are being examined, to figure out, which could be the most successful in a market economy in order to attract investors. It considers what system of management of a capitalled company is the most appropriate - in order to provide a location or rather a country - a competitive advantage in competition for global players. It is assumed that the type of the corporate governance system influences the company’s success or even more on the entire national economy.
As reference points, the German and the US model are often being used. Since they are opposed to one another in their paradigmatic and thus embody the exemplary corporate governance system. In addition, since the Cold War and beyond, the US has been a hegemon and has always had a great influence on the economic and financial system worldwide. Germany is regarded as the political and economic core of the most important partner of the USA, the European Union. Both are regarded as a highly developed economic system; their further development will attract attention beyond their national borders.
Although, the aim of corporate governance is identical, the institutional design and the underlying philosophies differ. As of a 1980´s it appears that the German bank-based system cannot meet the needs of the swift progress of financial markets. From the 1990s onwards, especially in the case of some serious legal measures in Germany, a move towards capital market orientation has been taking place. Since the prediction of a system convergence has been considered critical - because they are embedded in a corresponding cultural and socioeconomic system, which makes the transferability of the respective economic paradigms doubtful - this paper tries to examine if these legal regulations triggered a change in the German financial system.
Table of Contents
1 Introduction
2 Why Corporate Governance Matters
2.1 Definition and Intended Purpose
2.2 Theoretical Foundations
3 Corporate Governance as a System: Historical and Political Context
3.1 Origins of US Shareholder Capitalism
3.2 Origins of German Stakeholder Capitalism
4 Globalization: A Potential for Convergence
4.1 Why Convergence?
4.2 The German Financial System in Flux
5 Conclusion
Research Objectives and Topics
This academic paper examines the structural transformation of the German financial system, specifically investigating whether legislative measures and increasing global competitive pressures have successfully transitioned Germany from its traditional bank-based model toward a market-based system similar to the United States. The research addresses the following key themes:
- The theoretical foundations and paradigms of corporate governance systems.
- A historical analysis of US shareholder capitalism versus the German stakeholder model.
- The role of globalization as a driver for institutional convergence between differing economic systems.
- Evaluation of German financial reforms and their impact on market capitalization and capital procurement channels.
- The persistence of "voice" and "exit" control philosophies within national corporate governance frameworks.
Excerpt from the Book
1 Introduction
Few areas of business economics are discussed in such a controversial manner as differ ent corporate governance system’s. In a globalized age in which the capital markets of industrialized countries have a large operating range and a growing degree of interna tionalization, the design and regulation activities in this field have become increasingly important. This has been triggered a "competition of institutions".
In the current academic discussion, different corporate governance paradigms are being examined, to figure out, which could be the most successful in a market economy in order to attract investors. It considers, what system of management of a capital-led company is the most appropriate - in order to provide a location or rather a country - a competitive advantage in competition for global players. It is assumed that the type of the corporate governance system influences the company’s success or even more on the entire national economy.
As reference points, the German and the US model are often being used. Since they are opposed to one another in their paradigmatic and thus embody the exemplary corporate governance system. In addition, since the Cold War and beyond, the US has been a hegemon and has always had a great influence on the economic and financial system worldwide. Germany is regarded as the political and economic core of the most im portant partner of the USA, the European Union. Both are regarded as a highly devel oped economic system; their further development will attract attention beyond their national borders.
Although, the aim of corporate governance is identical, the institutional design and the underlying philosophies differ. As of a 1980´s it appears that the German bank-based system cannot meet the needs of the swift progress of financial markets.
Summary of Chapters
1 Introduction: Provides an overview of the controversy surrounding corporate governance systems and sets the research focus on the comparison between German and US models.
2 Why Corporate Governance Matters: Explores definitions and the theoretical agency theory foundations that necessitate monitoring and control mechanisms.
3 Corporate Governance as a System: Historical and Political Context: Analyzes the origins of the US shareholder-oriented system and the historical evolution of the German bank-based stakeholder model.
4 Globalization: A Potential for Convergence: Discusses the impact of globalization on economic systems and details the various reforms undertaken in Germany to align with international competitive standards.
5 Conclusion: Summarizes the findings, noting that despite formal convergence, functional differences and path dependencies cause the traditional German system logic to persist.
Keywords
Corporate Governance, Shareholder Capitalism, Stakeholder Capitalism, Germany, United States, Financial Markets, Convergence, Agency Theory, Bank-based System, Market-based System, Regulation, Path Dependence, Codetermination, Investor Protection, Globalization
Frequently Asked Questions
What is the central focus of this research paper?
The paper focuses on comparing the corporate governance systems of Germany and the United States to determine if the German bank-based model is moving toward a market-based system.
Which corporate governance models are contrasted in the study?
The study contrasts the US "shareholder capitalism" model, which emphasizes capital markets and investor returns, with the German "stakeholder capitalism" model, which incorporates banks and employee interests.
What is the primary objective or research question of the work?
The core research question is whether specific legal regulations and international competitive pressures have actually triggered a fundamental change in the German financial system toward market orientation.
What scientific methods are utilized?
The author employs a comparative institutional analysis, examining historical developments, legislative changes, and empirical financial data like market capitalization and capital procurement trends.
What topics are discussed in the main body?
The main body covers the theoretical foundations of corporate governance, the historical roots of both US and German systems, the drivers of global institutional convergence, and an evaluation of recent reforms like KonTraG and the German Corporate Governance Code.
Which keywords best characterize the work?
Key terms include Corporate Governance, Shareholder Capitalism, Stakeholder Capitalism, Financial Markets, Institutional Convergence, and Path Dependence.
What is the significance of the "voice" versus "exit" control philosophy?
"Voice" represents the German internal monitoring system via Supervisory Boards, while "exit" refers to the US market-based approach where investors sell shares if dissatisfied, serving as a disciplinary mechanism.
How did historical events influence the German system?
Historical events such as the 1931 banking crisis and the National Socialist era shaped the German stakeholder system, cementing the influential role of banks and later codetermination rights within the governance framework.
Does the author conclude that a fundamental change has occurred?
The author concludes that while there has been formal convergence, the underlying system logic remains largely resistant to change due to path dependencies, suggesting that the German system remains a hybrid.
- Arbeit zitieren
- Alexander Behne (Autor:in), 2015, Corporate Governance, Regulation and Financial Markets. Germany's Pathway to a Market-Based System?, München, GRIN Verlag, https://www.hausarbeiten.de/document/355592
