Change in the German Model of Corporate Governance: Evidence from Blockholdings 1997-2001

Abstract

We used the data on major holdings of voting rights in listed companies in 1997 and 2001 in order to research the dynamics of the German model of corporate governance. The change that took place in this short period of time is striking. The level of ownership concentration fell significantly, cross-holdings started to dissolve, and financial sector institutions, including the most powerful ones, lost their position as blockholders. The types of holders of voting rights in a company depend on its size, age, economic sector, and location. The concentration of voting rights is related primarily to the inclusion in DAX30 stock market index. We document a quick step of Germany towards the parameters of the Anglo-American corporate governance, but at the same time identify areas of strong persistence. There is a lot of diversity within the German model. Different types of companies and different regions have different corporate governance arrangements, with different development trajectories.