German Corporate Law Reform's Impact on Publicly Listed Companies' Performance Through Changes in Ownership Concentration

Abstract

This paper analyses the German corporate law reform’s effect on the publicly listed companies’ ownership and performance. First, theoretically plausible implications of the most important laws that were issued 1990-2009 are provided, then an empirical analysis using 1997-2008 panel data consisting of ownership, Tobin’s Q, and sales growth follows. Empirical evidence shows that ownership has become more dispersed (the total number of shareholders is larger) and that it had a positive statistically and economically significant effect on companies’ market value during the period. However, supporting Stulz (1988) and Shleifer and Vishny (1997) theories of optimal ownership dispersion level, our findings indicate that Germany has already approached the optimal ownership dispersion and concentration level and increased the equity market efficiency; therefore, these positive effects on companies’ market value have started to diminish.