The Role of Accounting in the German Financial System

Christian Leuz and Jens Wüstemann ()
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Jens Wüstemann: University of Mannheim, http://www.uni-mannheim.de/

No 2003/16, CFS Working Paper Series from Center for Financial Studies

Abstract: This chapter analyzes the role of financial accounting in the German financial system. It starts from the common perception that German accounting is rather "uninformative". This characterization 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. Due 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 Germany system and a survey of extant empirical accounting research generally support these arguments.

Keywords: Accounting; Disclosure; Germany; Standards; Survey (search for similar items in EconPapers)
JEL-codes: M41 G3 D82 K0 (search for similar items in EconPapers)
New Economics Papers: this item is included in nep-cfn, nep-fin and nep-law
Date: 2003-01-16
Note: Draft of Chapter 14 of the book "The German Financial System", edited by Jan P. Krahnen and Reinhard H. Schmidt, forthcoming with Oxford University Press, London 2003. We thank Karl-Herrmann Fischer, Jan Krahnen and Harry Schmidt for helpful comments on earlier versions.
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