Die Bedeutung der Besitzverflechtung von Kapitalgesellschaften für die Finanzmarktkrise / The importance of mutual ownership for the genesis of financial crisis

This paper elaborates on the importance of mutual ownership of joint-stock companies and corporations in general for the current financial crisis. Because corporations own and are owned by other corporations, in most boards of directors paid managers are effectively controlling themselves. The resulting economic dependencies and the possible implicit coordination within this comparatively small group allows managers to determine their own pay. As will be shown in the following, this fact has contributed considerably to the genesis of an incentive structure, which is generally aimed at short term profits. Given that especially for financial intermediaries there exists trade-off between long-run and short-term profit maximization due to the high correlation of risk and possible profits, the existing incentive structure has played a considerable role in the inadequate risk management of banks, the latter being one of the main reasons for the current crisis.