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Corporate Governance and Commercial Banking: A Comparative Examination of Germany, Japan, and the United States (with Geoffrey P. Miller), 48 Stanford Law Review 73 (1995)


The current paradigm of corporate governance theory suggests that the Japanese main bank system and the German universal bank system encourage socially optimal corporate decisionmaking. Unlike their Japanese and German counterparts, American banks are barred from taking an active role in corporate governance, both by laws restricting share ownership, and by legal rules which hold banks liable for exerting managerial control over borrowers. The debate among commentators has focused on whether the German and Japanese systems should be viewed as alternatives to the American model. In this article, Professors Macey and Miller challenge the current paradigm by demonstrating that powerful banks may prevent equity claimants from undertaking socially optimal risks, thereby hindering the development of robust capital markets. They conclude that the most effective model is one which large-block shareholders pose a credible threat to incumbent management and banks maximize their comparative advantage in controlling moral hazard.

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