Corporate Governance in Germany: The Influence of Banks and Large Equity-holders

Using data on 158 large German firms, the paper analyses the two main distinctive features of the German corporate governance system - ownership concentration and the role of banks. Ownership concentration is shown to have a positive effect on firm profitability (except when the owners are public-sector bodies). However, banks do not appear to play a role in corporate governance which is distinct from their position as one of several different types of large equity-holder. The results call into question the standard view that banks are an important component of the German system of corporate governance.