The Performance Effects and Determinants of Corporate Governance Reform in Japan

CORPORATE GOVERNANCE IN JAPAN: INSTITUTIONAL CHANGE AND ORGANIZATIONAL DIVERSITY, Masahiko Aoki, Gregory Jackson, Hideaki Miyajima, eds., June 2006

49 Pages Posted: 10 Oct 2005

See all articles by Hideaki Miyajima

Hideaki Miyajima

Waseda University - Graduate School of Commerce; Research Institute of Economy, Trade and Industry (RIETI)

Abstract

The wave of governance reforms that swept the country in the late 1990s has begun to shake up the boardrooms of Japanese corporations. Japanese companies' attitudes toward reform range broadly from actively receptive to very cautious. While attention is often focused on the importance of reforms based on the U.S. corporate governance model, with three distinct reform measures -- the protection of minority shareholders' rights, the separation of management from monitoring (including the introduction of outside board members), and active information disclosure -- seen as a single package, companies have responded in practice in diverse ways. Some have adopted only one or two of these measures; others have adopted all three. This paper addresses the performance effects and determinants of board reform. We examine whether the recently adopted measures mattered to corporate performance or not, and try to show which are most likely to improve performance. Second, we analyze the factors that determine a firm's decision to choose a particular reform. Has governance reform been encouraged by increasing capital market pressures but impeded by employee sovereignty, as is often assumed? And more specifically, has governance reform been slowed by employee involvement and the human resources management practices of Japanese firms? In order to answer these questions, we compiled a Corporate Governance Score (CGS) for each corporation, which is designed to capture the cumulative efforts of recent corporate governance reforms, focusing on: a) protection of the rights of minority shareholders (general meetings of shareholders), b) the extent of separation between management and monitoring in corporate boards, and c) information disclosure. We then used the CGS to conduct our estimations.

Keywords: Minority shareholders, information disclosure, ownership structure, employee involvement, human resources management, firm performance

JEL Classification: G34, J53, K22, L25

Suggested Citation

Miyajima, Hideaki, The Performance Effects and Determinants of Corporate Governance Reform in Japan. CORPORATE GOVERNANCE IN JAPAN: INSTITUTIONAL CHANGE AND ORGANIZATIONAL DIVERSITY, Masahiko Aoki, Gregory Jackson, Hideaki Miyajima, eds., June 2006, Available at SSRN: https://ssrn.com/abstract=818347

Hideaki Miyajima (Contact Author)

Waseda University - Graduate School of Commerce ( email )

1-6-1, Nishi-Waseda
Shinjuku-ku, Tokyo 169-8050
Japan
(81 3) 5286 2019 (Phone)
(81 3) 3203 7067 (Fax)

Research Institute of Economy, Trade and Industry (RIETI) ( email )

1-3-1 Kasumigaseki
Chiyoda-ku
Tokyo 100-8901
Japan

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