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Does Compliance with the German Corporate Governance Code Have an Impact on Stock Valuation? An empirical analysis

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  • Igor Goncharov
  • Joerg Richard Werner
  • Jochen Zimmermann

Abstract

Since 2002 company law requires listed German corporations to declare their degree of conformity to the German Corporate Governance Code (GCGC). We examine whether there is a pricing effect connected to the declared degree of compliance for a sample of (big) publicly traded German companies listed in the DAX 30 and MDAX. We find that the degree of compliance with the Code is value‐relevant after controlling for an endogeneity bias. This shows that the capital markets find the rules in the code meaningful and that there is capital market pressure to adopt the Code regulation. Our findings also suggest that the capital market fills a possible “control vacuum” resulting from the withdrawal of commercial banks from their (former) influential role in the German “insider control” corporate governance model.

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  • Igor Goncharov & Joerg Richard Werner & Jochen Zimmermann, 2006. "Does Compliance with the German Corporate Governance Code Have an Impact on Stock Valuation? An empirical analysis," Corporate Governance: An International Review, Wiley Blackwell, vol. 14(5), pages 432-445, September.
    • Handle: RePEc:bla:corgov:v:14:y:2006:i:5:p:432-445
    DOI: 10.1111/j.1467-8683.2006.00516.x
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    References listed on IDEAS

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    1. Schmidt, Reinhard H., 2003. "Corporate Governance in Germany: An Economic Perspective," CFS Working Paper Series 2003/36, Center for Financial Studies (CFS).
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