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German corporate governance and corporate law are currently undergoing a major change. The old “Deutschland AG,” a nationwide network of firms, banks, and directors, is eroding, ownership is diffusing, and the shareholder body is becoming more international than ever. This Article presents new data to support this development and explores the consequences in governance and in law that have been taken or that need to be drawn from this finding. Consistent with market-based theoretical accounts on corporate law, it finds that the changes currently underway are mainly a response to global market pressure: German banks divested their equity stakes mainly as a consequence of increased international competition.
The Article extends the model of market-led change by two important observations: first, market pressure is not the only driver of legal change, but the law itself in this case contributed to facilitating competition. Notably, a taxation law reform enabled and accelerated the competition process already underway. Legal rules and market competition may thus be understood not as operating in isolation, but as forces that can work in dialogue. Secondly, the Article highlights the importance of ownership structure as a significant intermediate condition in the logical order between market competition and legal change.
