The Effects of Ownership and Capital Structure on Board Composition and Strategic Diversification in Japanese Corporations

10 Pages Posted: 20 Mar 2005

See all articles by Toru Yoshikawa

Toru Yoshikawa

Singapore Management University - Lee Kong Chian School of Business

Phillip Phan

Johns Hopkins University - Carey Business School

Abstract

The board of directors plays an important role in solving the agency problem between shareholders and management. This paper investigates the relationships between ownership and board structure with the diversification strategy of large Japanese firms. The results show that corporate nominee directors are associated with lower levels of product diversification of their investee firms. This suggests that nominee directors in large Japanese corporations see themselves representing specific interests and therefore investors should pay attention to board composition in order to assess the level of protection they can expect to receive. Even without any apparent agency problem with management, there remains a potential "principal-principal" problem.

Suggested Citation

Yoshikawa, Toru and Phan, Phillip H., The Effects of Ownership and Capital Structure on Board Composition and Strategic Diversification in Japanese Corporations. Available at SSRN: https://ssrn.com/abstract=684316

Toru Yoshikawa (Contact Author)

Singapore Management University - Lee Kong Chian School of Business ( email )

50 Stamford Road
Singapore, 178899
Singapore

Phillip H. Phan

Johns Hopkins University - Carey Business School ( email )

100 International Drive
Baltimore, MD 21202
United States

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