Changes in Germany's Bank-Based Financial System: Implications for Corporate Governance

11 Pages Posted: 20 May 2005

See all articles by Sigurt Vitols

Sigurt Vitols

WZB Berlin Social Science Center


Throughout the 20th century, banks have dominated Germany's financial system and also played a key role in corporate governance. Recently, however, a number of efforts have been made to increase the role of markets within this bank-based financial system, including regulatory innovations and a reform of the pension system. This article finds that, despite these changes, there are a surprising number of continuities in the structure of the financial system. The German financial system can therefore still be characterised as bank-based. Furthermore, banks have only partially withdrawn from the stakeholder system of corporate governance, and to some extent been replaced by insurance companies. An explanation for these continuities is advanced which emphasises stability in household investment behaviour and in patterns of company sector demand for finance.

Suggested Citation

Vitols, Sigurt, Changes in Germany's Bank-Based Financial System: Implications for Corporate Governance. Corporate Governance: An International Review, Vol. 13, No. 3, pp. 386-396, May 2005, Available at SSRN:

Sigurt Vitols (Contact Author)

WZB Berlin Social Science Center ( email )

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D-10785 Berlin

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