This paper analyzes the determinants of the German corporate governance rating NEWLINE recently developed by Drobetz, Schillhofer, and Zimmermann (2004). We find a NEWLINE non- linear relationship between ownership concentration and the quality of firmlevel NEWLINE corporate governance as measured by the rating. Firms with larger boards of NEWLINE directors have lower governance ratings, but firms that apply US-GAAP or IAS NEWLINE rules and/or use an option-based remuneration plan have higher corporate governance NEWLINE ratings. Our results question the comply-or-explain principle embedded in NEWLINE recent corporate governance codes and call for a more rules-based approach in NEWLINE improving corporate governance in Europe
