The Role of Accounting in the German Financial System

Christian Leuz and Jens Wüstemann

in The German Financial System

Published in print March 2004 | ISBN: 9780199253166
Published online January 2005 | e-ISBN: 9780191601651 | DOI:
 The Role of Accounting in the German Financial System

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Analyses the role of financial accounting in the German financial system. It starts from the common perception that German accounting is rather ‘uninformative’. This characterisation is appropriate from the perspective of an arm’s length or outside investor and when confined to the financial statements per se. But it is no longer accurate when a broader perspective is adopted. The German accounting system exhibits several arrangements that privately communicate information to insiders, notably the supervisory board. Owing to these features, the key financing and contracting parties seem reasonably well informed. The same cannot be said about outside investors relying primarily on public disclosure. A descriptive analysis of the main elements of the German system and a survey of extant empirical accounting research generally support these arguments.

Keywords: accounting standards; corporate governance; disclosure; financial accounting system; information channels; international accounting; survey

Chapter.  14263 words. 

Subjects: Financial Markets

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