Title: Compliance with the German Corporate Governance Code and firm performance: a ten-year experience

Authors: Markus Stiglbauer; Patrick Velte

Addresses: School of Business and Economics, University of Erlangen-Nürnberg, Lange Gasse 20, 90403 Nuremberg, Germany. ' School of Business Economics and Social Sciences, University of Hamburg, Max-Brauer-Allee 60, 22765 Hamburg, Germany

Abstract: In 2002, the German Corporate Governance Code (GCGC) was established to improve corporate governance of German listed firms and to make the German corporate governance system and firm-specific corporate governance more transparent for (international) investors. With regard to the empirical corporate governance research it is not sure, whether these non-enforced soft law standards might contribute to a management-based influence of the behaviour of the investors. This paper explores how far companies are in line with the GCGC and if investors reward companies which comply with the GCGC. Against theoretical assumptions, reviewing the empirical studies on this topic we find compliance with the GCGC not to affect German listed firms' capital market performance significantly positive. The findings give good reason to discuss whether in view of the behavioural financial accounting enforcement of good corporate governance via soft law or rules is convenient for a still developing German capital market and the German bank-based corporate governance system with traditionally low investor protection (insider system).

Keywords: corporate governance code; investor reaction; firm performance; enforcement; Germany; behavioural accounting; finance; investor protection.

DOI: 10.1504/IJBAF.2012.047356

International Journal of Behavioural Accounting and Finance, 2012 Vol.3 No.1/2, pp.5 - 23

Available online: 16 Jun 2012 *

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