بانکداری جهانی و عملکرد شرکت های آلمانی

We empirically investigate the influence of German universal banks on the performance of German firms. We take into account banks’ control rights from equity ownership, banks’ proxy-voting rights, and the concentration of control rights from equity ownership (which includes complex forms such as pyramids, cross-shareholdings, and stocks with multiple votes). We also account for voting restrictions and the German codetermination system (under which employees of large firms have control rights that are unrelated to equity ownership). We find that firm performance improves to the extent that equity control rights are concentrated. Moreover, bank control rights from equity ownership significantly improve firm performance beyond what nonbank blockholders can achieve.

German universal banks appear to be powerful institutions in that they can own blocks of equity and vote individual shareholders’ votes in proxy. This system has been controversial for over a century (e.g., Hilferding, 1910) and is addressed more recently in the report of the Gessler Commission (e.g., Studienkommission, 1979; Krümmel, 1980), but apart from Cable (1985) there has been no empirical analysis of this corporate governance system and there is certainly no agreement about the effects of German banks on the performance of firms. One view of the German system is that German banks are large, active, informed investors that improve the performance of firms to the extent that they hold equity and have voting power from casting the votes of small investors in proxy. Banks are seen as long-term investors who oversee firms’ investments and organize internal capital markets, rather than acting as myopic investors (e.g., Porter, 1992; Grundfest, 1990). The banking relationship mitigates the costs of both external financing and of actively monitoring management. Proponents of this view see German banks as a model of active block shareholders that should be emulated in stock-market-based economies (where shareholders are dispersed and institutional investors are passive). For example, Grundfest (1990) asserts: “In Germany, large banks and industrial combines exercise substantial influence over the operation of many companies and are able to effect management and strategic changes when circumstances warrant” (p. 105). Critics of universal banking see the enormous power of banks as harmful because of conflicts of interest that a bank faces when it simultaneously is a large equity holder in the firm, is in control of a large number of proxy votes, controls access to external capital markets, and has loans outstanding to the firm. Because banks themselves seem impervious to external control, the concentration of power in banks is seen as allowing them to essentially run firms in their own interests. For example, banks can refuse to allow cash to be paid out of firms in order to maintain “hidden reserves”. Or a bank might force a value-reducing merger between a distressed and a nondistressed firm, both of which it controls. Wenger and Kaserer (1998) express this unfavorable view on German banks: …German banks do not only provide industrial companies with loan capital but also exercise considerable voting power in stockholder meetings of many public corporations. This is partly due to proxies of their clients and partly due to stock ownership. …we would argue that this specific institutional environment does not reduce agency problems; on the contrary, this situation is prone to enlarge and perpetuate these problems (p. 50). Banking laws in Germany do not legally restrict commercial banks from holding blocks of equity in nonfinancial firms. Consequently, banks can have control rights in the form of votes that they would not have in the U.S., for example. As we will see below, however, bank blockholding is not so pervasive in Germany, while blockholding by nonbanks is extensive. The control rights of these blockholders can be limited by voting restrictions. For example, the voting rights of shareholders can be restricted by the firm's charter to a maximum fraction in the firm's total voting stock, regardless of the fraction of shares owned. While voting restrictions apply to any shareholder, banks can potentially exercise more votes because voting restrictions generally do not apply to votes that banks cast on behalf of small shareholders. For example, a firm can be owned by a single bank with 5% of the shares, a nonbank blockholder with 50% of the shares, and dispersed shareholders with the remainder. If there is a voting restriction constraining the votes of the nonbank blockholder to 10%, and if the bank further controls all of the proxy votes of the small shareholders, then the bank, in the absence of any other considerations, effectively controls this firm. (Changes to the firm's charter typically require a 75% majority.) Note that this could occur even if the bank owned no shares. In such a case, there is no link between cash-flow rights and control rights. It is not only the role of German banks that has been controversial. There is an extensive literature on codetermination, that is, the laws requiring that firm employees hold voting seats on the supervisory boards of large firms. (In Germany, limited liability companies have a two-tiered board system.) Because of codetermination, governance of German firms does not depend solely on possession of control rights in the form of votes attached to equity shares. The controversy emanates from the ideological implications of dictating that some of the owners’ control rights effectively be ceded to labor. Codetermination, for example, means that a large firm owned by a single shareholder, or perhaps a family, cannot appoint all the directors on the supervisory board. Under the two-tiered board system, management is insulated, at least to some extent, from discipline by shareholders. While the literature on German codetermination is massive, there is relatively little quantitative work assessing the impact of codetermination on firm performance; Gorton and Schmid (1998) provide a brief survey. The theoretical effects on firms of the codetermination system are difficult to assess because the objectives of the employees are not obvious. On one hand, to the extent that employees are residual claimants by virtue of their investment of, possibly, firm-specific human capital, they will govern in the interests of shareholders. On the other hand, if their human capital is not diversifiable, risk-averse employees’ objectives can differ from those of shareholders. In essence, codetermination reduces the value of control rights from equity ownership. In fact, Gorton and Schmid (1998) find that with employees on a firm's board, firm resources are directed to less productive uses, decreasing the return on assets, the return on equity, and the market-to-book ratio of equity. Universal banking, proxy voting, and codetermination suggest that, in reality, corporate governance in Germany is much different from the system described by received theory (see La Porta et al., 1999a). In theory, corporate governance is based on the system of one share, one vote, an apparently incentive-compatible way of linking claims on cash flows with control rights. (Grossman and Hart, 1988; Harris and Raviv, 1988, provide the theoretical arguments for the optimality of one share, one vote.) Germany, however, is clearly different from that model. Little is known about the German system due to a lack of theory rich enough to provide predictions in such a complicated setting, as well as a lack of data. Disclosure requirements in Germany simply do not exist to the same extent as in Anglo-American stock-market-based economies. Nevertheless, in this paper we empirically investigate corporate governance in Germany. We study four data sets covering 1975 and 1986, each with different advantages and disadvantages. An empirical description of the effects of the above corporate governance characteristics on the performance of German firms requires that we distinguish between equity ownership per se and the control rights that are derived from it. We need measures of control rights and control rights concentration, which we can link to firm performance by some functional relation. Each of these steps is fraught with difficulty. With respect to control, one measure of control or power is the number of votes controlled by ultimate shareholders, following La Porta et al. (1999a). Measuring control rights concentration requires a theoretical model of how large shareholders interact. While such models exist, they are based on voting behavior that implicitly assumes that cash-flow rights and control rights are closely linked. Moreover, these models cannot accommodate blockholders with different information, proxy voting, and voting restrictions. As we discuss below, we adopt the Herfindahl index as a measure of concentration that can be applied to the German case. Firm performance is not straightforward to measure either. Since Germany is less reliant on the stock market and has fewer disclosure requirements, we face the choice of relying on (German) accounting measures of performance or on market-based measures. The latter choice requires us to restrict our attention to publicly traded firms, an assumption that seems counter to the spirit of the investigation. We therefore use both accounting-based and market-based measures of performance. There is also little theoretical guidance about the functional link between equity ownership and firm performance once the connection between cash-flow rights and control rights has, at least to some extent, been broken. Even for the more straightforward case of one share, one vote, as in the U.S., the relation between firm performance and the ownership stake of management has been argued to be nonlinear. Morck et al. (1988), for example, examine the effect of insider concentration (the fraction of firm equity owned by top management) on nonfinancial firms’ performance measured by Tobin's Q and find a piecewise linear, U-shaped relation. See also McConnell and Servaes (1990), who also examine U.S. nonfinancial firms, and Gorton and Rosen (1995), who analyze U.S. banks. The German case is even more complicated than the U.S. case. While it is clear that the more cash-flow rights in a firm a party has, the more this party will want to improve the firm's performance, it is not clear what the objective function is for a party with control rights substantially in excess of cash-flow rights. This party might be interested in extracting private benefits rather than improving the value of cash-flow rights to which it has only a small claim. Thus, an important difficulty with analyzing the effects of banks on firms in Germany is that the bank can face conflicts of interest over some ranges of bank equity holdings, proxy-voting, and other (i.e., nonbank) shareholdings, but not over other ranges. Moreover, voting restrictions clearly can have an impact. But aside from considerations of the distribution of effective voting power in relation to cash-flow rights, codetermination undermines the power of votes attached to equity shares. The power of banks, to the extent that it is not derived from ownership in voting stock, can further undermine equity control rights. In our empirical investigation of the influence of German universal banks and codetermination on the performance of German firms, we take into account banks’ control rights that emanate from ownership of voting stock, banks’ proxy-voting rights, the concentration of control rights from equity ownership, and voting restrictions. Equity ownership can involve pyramids, cross-shareholdings, and stocks with multiple votes. Because of the complexity of the firm's control structure, we test semiparametric specifications against various parametric specifications to determine the appropriate shape of the relation. This allows us to test for conflicts of interest between firm shareholders and banks, and between employees and shareholders. Further structure is then imposed in the form of a parametric specification. We also examine the influence of banks and employees on boards of directors. The paper proceeds as follows. In Section 2 we describe the samples and discuss issues concerning the measurement of control rights in Germany. We also discuss the construction of variables that will be used in econometric tests. In Section 3 we propose hypotheses. Section 4 outlines the econometric methodology. Section 5 presents the basic set of results. Section 6 analyzes banks’ representation on corporate boards. Section 7 is a discussion of the results. Section 8 is a brief conclusion. 2. Measuring control rights, control rights concentration, and the performance of German firms Four issues are critical to our empirical analysis. First, we must construct a measure of equity control rights from data on ownership of (voting) stock. Second, we need a measure of concentration of the equity control rights. Third, we need a measure of firm performance. Finally, we need a functional specification for the link between control rights, control rights concentration, and firm performance. In this section we introduce the data sets. We then discuss two of the three measurement issues. We summarize the equity control rights structure of German firms based on our samples and we discuss voting restrictions. Finally, we address the third measurement issue and discuss firm performance measures and some other variables that we will use later.

Little is known about corporate governance in economies in which the stock market is not a central institution. In economies with stock markets, the link between control rights and cash-flow rights is more direct and, consequently, can be the basis for takeovers as the ultimate form of governance. Poorly run firms can be taken over by a raider who buys shares in the stock market. Because a share purchase is the purchase of a bundle of cash-flow rights and control rights, the raider will have an incentive and the power to improve the value of the firm. In economies with small or nonexistent stock markets, banks appear to be very important. The concentration of effective, if not formal, power in banks is in contrast to the workings of stock market economies. Our investigation focuses on the extent to which a bank relationship in Germany affects firm performance when the mechanism of takeovers is absent and banks appear powerful. What happens in economies in which the stock market is not so liquid and listings are few? In Germany, several institutional features, aside from the small stock market, suggest that the link between cash-flow rights and control rights is somewhat uncoupled. In particular, with respect to corporate governance, Germany has the following notable features: (i) bank equity ownership, (ii) proxy voting by banks, (iii) high concentration of equity ownership, and (iv) codetermination. We empirically investigate whether these features interact in ways that provide a role for banks to positively affect the performance of firms. When doing that we take into account (i) voting restrictions, (ii) pyramiding, (iii) cross-shareholdings, and (iv) stocks with multiple votes. We find evidence supporting the notion that banks are an important part of the corporate governance mechanism in Germany. Firm performance, measured by the market-to-book value of equity, improves to the extent that banks have control rights from equity ownership. During the periods we investigate, banks do not extract private value to the detriment of firm performance. We find no evidence of conflicts of interest between banks and other shareholders. In particular, we find no evidence that banks use proxy voting to further their own private interests or, indeed, that proxy voting is used at all. It appears, then, that corporate governance mechanisms that are different from those that operate in stock-market-based economies can be effective. Clearly, however, many questions remain to be studied.