Corporate governance and the dynamics of ownership of German firms between 1997 and 2007

Abstract

La Porta et al. (1999) find that countries with weak corporate governance tend to have higher ownership concentration than countries with legal systems that protect shareholders well. Changes in the quality of corporate governance are often followed by adjustments in ownership structure. On a sample of first layer as well as ultimate ownership (10% and 20% cut-off threshold) data for 11 years between 1997 and 2007 for German firms listed in the DAX, we examine the dynamics of ownership structure. We find that ownership concentration strongly declined. Further, foreign financial institutions became an important investor group with an increase of average stake from 0.4% in 1997 to 9.1% in 2007. We conclude that the quality of corporate governance increased and the Germany capital market became more open during that period.