The (Ir)relevance of Disclosure of Compliance with Corporate Governance Codes - Evidence from the German Stock Market

Purpose – This paper aims to provide insight whether disclosed compliance with the German Corporate Governance Code (GCGC) leads to higher valuation on the German stock market. Design/methodology/approach – Based on agency theory, stakeholder theory and institutional theory, the authors conduct a meta-analysis and evaluate the value relevance of the compliance with the GCGC. Findings – The research finds that compliance with the GCGC is mainly not a value-relevant factor for German companies listed at the Frankfurt Stock Exchange. Research limitations/implications – The research considered is not fully comparable with regard to observation date, full integration of the GCGC rules and company selection/sample size. Future research is encouraged to research the valuation effects of compliance with the GCGC for a longer time horizon, the use of uniform performance measures and the integration of all GCGC rules. Practical implications – Compliance with the GCGC has not proven to be a value-driver for German listed companies. The authors recommend companies to search for opportunities to make their corporate governance more comprehensive by expanding their corporate governance reporting and thus providing deeper insights on how their processes of management and control work. Originality/value – The paper is the first investigation integrating the results of ten years of “code compliance – market valuation” research in Germany. We detect reasons why soft law regulation by corporate governance codes did not function on the German stock market. We additionally address behavioral aspects why investors do not give enough relevance to companies’ corporate governance statements so far.

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Information and Geography: Evidence from the German Stock Market

SSRN Electronic Journal ◽

10.2139/ssrn.182532 ◽

1999 ◽

Cited By ~ 7

Author(s):

Harald Hau

Keyword(s):

Stock Market ◽

German Stock ◽

German Stock Market

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Volume and Return Effects of Technical Trading Rules on the German Stock Market

SSRN Electronic Journal ◽

10.2139/ssrn.2022282 ◽

2012 ◽

Author(s):

Thomas Etheber

Keyword(s):

Stock Market ◽

Technical Trading ◽

Technical Trading Rules ◽

Trading Rules ◽

German Stock ◽

German Stock Market

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Implementing the Fama-French Five-Factor Model for the German Stock Market

SSRN Electronic Journal ◽

10.2139/ssrn.3300642 ◽

2018 ◽

Author(s):

Philipp Dirkx ◽

Franziska Peter

Keyword(s):

Stock Market ◽

Factor Model ◽

Five Factor Model ◽

German Stock ◽

German Stock Market

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Can the FSCORE add value to anomaly-based portfolios? A reality check in the German stock market

Financial Markets and Portfolio Management ◽

10.1007/s11408-021-00400-9 ◽

2021 ◽

Author(s):

Eero J. Pätäri ◽

Timo H. Leivo ◽

Sheraz Ahmed

Keyword(s):

Stock Market ◽

Trading Strategies ◽

Added Value ◽

Financial Statement ◽

Research Setting ◽

Holding Period ◽

Reality Check ◽

German Stock ◽

Overall Performance ◽

German Stock Market

AbstractThis paper examines the added value of using financial statement information, particularly that of Piotroski’s (J Account Res 38:1, 2000. https://doi.org/10.2307/2672906) FSCORE, for equity portfolio selection in the German stock market in a realistic research setting in which the critique against the implementability of FSCORE-based trading strategies is taken into account. We show that the performance of annually rebalanced long-only portfolios formed on any of the examined 12 accounting-based primary criteria improves by including the FSCORE as a supplementary criterion. Our study is the first to show that although the FSCORE boost is strongest for the 1-year holding period length, it also holds, on average, for the 3-year holding period. The use of a 3-year updating frequency is particularly beneficial for the low-accrual portfolio that—when supplemented with the high-FSCORE threshold—generates the best overall performance among all 75 portfolios examined. Moreover, we show that a high FSCORE is also an efficient stand-alone criterion for long-only portfolio formation.

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