Private firms make up most of the economy, yet they have no stock price, no analyst coverage, and accounts written under local rules that make it difficult for foreign investors to benchmark. In 2010, Germany aligned those rules with the international accounting standards. Our study, published in Management Science, measures how foreign investment responded.
in additional foreign investment across 4,901 German private firms (estimated range: EUR 3.8–12.5 bn).
↓ The three main findings
Finding 1 · The effect of the reform
In 2010, Germany's BilMoG reform aligned private-firm accounting rules with international standards (IFRS). Foreign ownership rose by 2–8 percentage points relative to firms the reform did not affect; the estimate is positive and statistically significant in every specification.
Additional foreign ownership of German private firms after the reform
Difference-in-differences estimates, percentage points · capsules: 95% confidence intervals · second axis: EUR billions
| Control group | Research design | Estimate (pp) | 95% CI |
|---|---|---|---|
| Austrian private firms | Base regression | +3.0 | 2.1 to 4.0 |
| Austrian private firms | Controls + industry FE | +2.8 | 1.8 to 3.8 |
| Austrian private firms | Entropy balancing | +4.1 | 2.6 to 5.6 |
| Austrian private firms | Coarsened exact matching | +2.4 | 1.4 to 3.4 |
| Austrian private firms | Propensity score matching | +5.3 | 3.7 to 6.8 |
| Austrian private firms | EB & PSM combined | +3.5 | 1.7 to 5.2 |
| German public firms | Base regression | +4.4 | 2.1 to 6.7 |
| German public firms | Controls + industry FE | +3.5 | 1.2 to 5.7 |
| German public firms | Entropy balancing | +8.0 | 2.8 to 13.2 |
| German public firms | Coarsened exact matching | +2.8 | 1.1 to 4.5 |
| German public firms | Propensity score matching | +2.6 | 0.7 to 4.4 |
| German public firms | EB & PSM combined | +4.6 | 1.4 to 7.9 |
The comparison groups are Austrian private firms, whose accounting rules were nearly identical to Germany's and did not change, and German public firms, which already reported under IFRS. Across six research designs and both control groups, the estimates range from +2.4 to +8.0 percentage points, corresponding to roughly EUR 3.8–12.5 billion of additional foreign equity investment.
Finding 2 · Where the new investment came from
Existing foreign shareholders left their stakes essentially unchanged. The increase came from investors entering for the first time, and these new owners typically acquired control.
Average change in foreign ownership around the reform
German private firms, percentage points
| Group | Change (pp) |
|---|---|
| Firms with no foreign owner before 2010 | +53.9 |
| Firms with an existing foreign owner | −2.9 (essentially unchanged) |
| Foreign corporations (relative change) | +6.2 |
| Families & individual owners (relative change) | −5.4 |
The typical stake taken by these new investors was 48–56%, a controlling position. Foreign corporations gained ownership (+6.2 pp) relative to owner families and individuals (−5.4 pp).
Finding 3 · Which investors responded
An explanation based on taxes or the financial crisis would affect all investors alike. The response instead tracks how familiar each group already was with IFRS-style accounts.
Post-reform change in ownership, by the investor's home accounting standard
Foreign investors in German private firms, percentage points, relative to the reference group of EU investors already under IFRS (+3.5 pp)
| Investor's home standard | Change (pp) |
|---|---|
| Converging to IFRS (e.g., China, Singapore) | +10.3 |
| IFRS (e.g., France, UK, Netherlands) | +7.3 |
| US GAAP | no statistically significant effect |
| Other local rules | no statistically significant effect |
We compared foreign ownership in German private firms before and after the 2010 reform with Austrian private firms and German public firms, which the reform did not affect. Before the reform, all groups moved in parallel; afterwards, only German private firms diverged. This difference-in-differences design isolates the effect of the reform from the financial crisis, the euro, and other conditions affecting all firms alike.
Among 8,056 UK private firms (2014–2023), those that voluntarily adopted IFRS show about 5–6 percentage points more foreign ownership than firms remaining on local UK GAAP: the same pattern in a different country and decade. Stricter comparisons of each firm with itself yield smaller effects (about 2–3 points) in the same direction.
Ownership and financial data come from Bureau van Dijk's Orbis database: 4,901 German private firms, 1,382 Austrian private firms, and 129 German public firms over 2006–2013. The full replication package (code and shareable data) accompanies the paper at Management Science.
Since 2013, US standard setters have simplified private-firm GAAP away from public-firm rules ("big GAAP vs. little GAAP"). This evidence indicates that the divergence has a measurable cost in forgone foreign capital.
As the EU weighs reducing reporting burdens for private firms, the debate focuses on what accounting rules cost. Our findings add the other side of the ledger: comparable accounts attract cross-border investment.
For owners considering succession or growth capital, accounts that a foreign buyer can compare widen the pool of potential buyers. Where a German private firm has a foreign owner, that owner holds on average at least 67% of the shares, a controlling position.