EconStor >
Universität zu Köln >
Centre for Financial Research (CFR), Universität Köln >
CFR Working Papers, Centre for Financial Research (CFR), Universität Köln >

Please use this identifier to cite or link to this item:

http://hdl.handle.net/10419/41355
  
Title:Setting a Fox to Keep the Geese: Does the comply-or-explain principle work? PDF Logo
Authors:Andres, Christian
Theissen, Erik
Issue Date:2008
Series/Report no.:CFR working paper 08-01
Abstract:The German Corporate Governance Code works according to the comply-or-explain principle. One of its recommendations was to publish the remuneration of the members of the executive board on an individual basis. We examine the characteristics of the firms that comply with the code requirement. Our results indicate that firms that pay higher average remunerations to their management board members are less likely to comply, whereas firms with higher Tobin's Q are more likely to comply. We also document a non-monotonic relation between ownership concentration and the probability of compliance that is consistent with standard corporate governance arguments. Due to the fact that the number of firms complying with the disclosure requirement was low, a new law was passed that mandates disclosure unless the shareholders' meeting (with a 75% majority) decides otherwise. We find that this 'loophole' in the new legislation is exploited by smaller firms, firms with comparatively high levels of executive remuneration, and firms with concentrated ownership. We discuss the implications of our results for the effectiveness of the comply-or-explain regulation.
Subjects:executive compensation
corporate governance
self regulation
JEL:G30
G32
G38
Document Type:Working Paper
Appears in Collections:CFR Working Papers, Centre for Financial Research (CFR), Universität Köln

Files in This Item:
File Description SizeFormat
582131391.pdf536.74 kBAdobe PDF
No. of Downloads: Counter Stats
Download bibliographical data as: BibTeX
Share on:http://hdl.handle.net/10419/41355

Items in EconStor are protected by copyright, with all rights reserved, unless otherwise indicated.