Diverging Paths: Accounting for Corporate Governance in America and Germany

Fear, Jeffrey; Kobrak, Christopher

doi:10.1017/s0007680500080971

Cited by 31 publications

(4 citation statements)

References 37 publications

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“…Lloyds-Jones et al (2005), in a longitudinal study from 1906 to 1933, show that a dominant group of directors emerged at the Birmingham Small Arms Corporation, but that this group were eventually forced to concede control after sustained criticism from shareholders and in response to a changing legal and business environment. Fear and Kobrak (2006) show that American and German accountancy took different paths in the early part of the twentieth century. In Germany, a persistent disconnect arose between relatively sophisticated managerial accounting practices for insiders and the methods used in public financial accounting.…”

Section: Research Methods and Conceptual Frameworkmentioning

confidence: 95%

Accounting and internal mechanisms of corporate governance during the inter-war-period in France

Bensadon

2021

Accounting History

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This article focuses on the role of accounting in governance arrangements. The French context is marked by the inexistence of external governance mechanisms and by the total lack of effectiveness of independent auditing. Therefore, the objective of this article is to shed light on the internal governance mechanisms implemented by the leading French aluminium producer during the inter-war period and the role played by accounting in this implementation. On the basis of the archives of the Compagnie Alais, Froges et Camargue (AFC) between 1921 and 1939, it appears that in a context marked by very strong external growth, management strengthened financial reporting systems and internal control procedures. In addition, the directors used the financial statements as early as 1923 to determine the financial effort of the AFC group and to measure the flows intended to finance the group’s material and financial investments. Accounting is unquestionably at the heart of AFC’s internal governance mechanisms.

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Section: Research Methods and Conceptual Frameworkmentioning

confidence: 95%

Accounting and internal mechanisms of corporate governance during the inter-war-period in France

Bensadon

2021

Accounting History

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“…The publication of an annual profit-and-loss statement was prescribed from 1884 onwards, but many corporations published profit-and-loss statements before that date. Moreover, accounting standards were clear and undisputed and nearly of the same level as accounting standards in modern Germany (Fear and Kobrak, 2006). The general acceptance of accounting standards may, for example, be judged by the number of court cases regarding accounts.…”

Section: Data Qualitymentioning

confidence: 97%

“…Instead, company supervision was handed over to a shareholder body, the supervisory board (Aufsichtsrat), see, e.g., Renaud (1875) or Gareis (1880) for textbook treatments of Germany's corporate law in this period. Thus, the 1870 reform established the German system of corporate control of today, which differs from the UK and US systems (see Fohlin, 2007, andFear andKobrak, 2006, for details).…”

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confidence: 99%

Corporate governance and incentive contracts: Historical evidence from a legal reform

Bayer

Burhop

2009

Explorations in Economic History

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This paper proposes to exploit a reform in legal rules of corporate governance to identify contractual incentives from the correlation of executive pay and firm performance. In particular, we refer to a major shift in the legal and institutional environment, the reform of the German joint-stock companies act in 1884. We analyze a sample of executive pay for 46 firms for the years 1870 to 1911. In 1884, a law reform substantially enhanced corporate control, strengthened the monitoring incentives of shareholders, and reduced the discretionary power of executives in Germany. Pay-performance sensitivity decreased significantly after this reform. While executives received a bonus of about three to five per cent in profits before 1884, after the reform this parameter decreased to a profit share of about two per cent. At least the profit share that is eliminated by the reform must have been incentive pay before. This incentive mechanism was replaced by other elements of corporate governance. JEL-Classification: G30, J33, N23

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“…As both contemporary and current research suggest for the late nineteenth century, accounting literature was mainly produced by practitioners who described problems within their companies and tried to generalise their best-practice solutions. An institutionalised scientific examination of the problems of accounting, on the other hand, can only be observed with the founding of the first German business schools around 1900 (Fear and Kobrak 2006, pp. 21–2).…”

Section: IIImentioning

confidence: 99%

De-coding the image of the firm: secret reserves and internal financing in the German chemical industry, c. 1890–1916

Steinfeld

2022

Financial History Review

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This article uses the leading firms of the German chemical industry as a case study to provide a detailed example of how companies in the late nineteenth and early twentieth century used internal financing as an instrument of corporate finance. It traces the at first diverse significance of internal financing for the industry and identifies two moments of market concentration that triggered a convergence of corporate finance by a harmonisation of accounting standards that were not predefined by legal frameworks. The article argues that secret reserves and further ways of internal financing were key components of this harmonisation. The industry-wide creation of secret reserves cloaked the companies’ actual financial strength from outsiders who were merely left with an image of the respective firms that was carefully drafted by companies’ managers.

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Diverging Paths: Accounting for Corporate Governance in America and Germany

Cited by 31 publications

References 37 publications

Accounting and internal mechanisms of corporate governance during the inter-war-period in France

Accounting and internal mechanisms of corporate governance during the inter-war-period in France

Corporate governance and incentive contracts: Historical evidence from a legal reform

De-coding the image of the firm: secret reserves and internal financing in the German chemical industry, c. 1890–1916

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