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The Effectiveness of Corporate Governance in One-Tier and Two-Tier Board Systems – Evidence from the UK and Germany –

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  • Jungmann Carsten

    (Dr. iur., LL.M. (Yale), M.Sc. in Finance (Leicester), Wissenschaftlicher Assistent, Bucerius Law School in Hamburg.)

Abstract

Germany and the UK are paradigms of systems in which the control of managing directors of companies either lies in the hand of a separate supervisory board (two-tier system) or is an additional task of the board itself (one-tier system). This paper provides for an empirical test of the effectiveness of both systems of corporate governance. The analysis of the financial performance and board turnover of the largest companies listed on the stock exchanges in Frankfurt and London over a total of 400 financial years establishes that both systems are effective means of control. Yet the analysis also demonstrates that it is not possible to assign superiority to either of them. Therefore, the often raised question as to whether one of the two systems will finally prevail and whether there will be ultimate convergence of both systems, has to be answered in the negative. As the discussion of the strengths and weaknesses will show, however, there is still scope for improvements in each of the two board models.

Suggested Citation

  • Jungmann Carsten, 2006. "The Effectiveness of Corporate Governance in One-Tier and Two-Tier Board Systems – Evidence from the UK and Germany –," European Company and Financial Law Review, De Gruyter, vol. 3(4), pages 426-474, December.
    • Handle: RePEc:bpj:eucflr:v:3:y:2006:i:4:p:426-474:n:5
    DOI: 10.1515/ECFR.2006.019
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    Cited by:

    1. Windsor, Duane, 2009. "Tightening corporate governance," Journal of International Management, Elsevier, vol. 15(3), pages 306-316, September.
    2. Mavrakana, Christina & Psillaki, Maria, 2019. "Do board structure and compensation matter for bank stability and bank performance? Evidence from European banks," MPRA Paper 95776, University Library of Munich, Germany.
    3. Ichiro Iwasaki, 2013. "Firm-Level Determinants of Board System Choice: Evidence from Russia," Comparative Economic Studies, Palgrave Macmillan;Association for Comparative Economic Studies, vol. 55(4), pages 636-671, December.

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