Corporate Governance Reforms under Abenomics

doi:10.1017/9781108921145.012

12 - Corporate Governance Reforms under Abenomics

The Economic Consequences of Two Codes

from Part IV - Third Arrow of Abenomics

Published online by Cambridge University Press: 05 February 2021

Hideaki Miyajima and

Takuji Saito

Edited by

Takeo Hoshi and

Phillip Y. Lipscy

Show author details

Takeo Hoshi: Affiliation:
University of Tokyo
Phillip Y. Lipscy: Affiliation:
University of Toronto

Book contents

Get access

Summary

Corporate governance reform was one of the central issues in the “third arrow” of the Abe administration’s economic revival program. The Japanese Stewardship Code was introduced in 2014, followed by the Corporate Governance Code in 2015. This chapter quantifies how the reform changed the corporate governance of Japanese firms. Firstly, we examine the changes in institutional ownership, cross-holdings, and board structure following the reforms. Then we study whether changes in ownership structure and board structure affect the firm behavior and performance. We find that the introduction of the Stewardship Code is associated with more institutional ownership, especially in mid-sized firms. Firms with few outside directs increase the number of outside directors to follow the Corporate Governance Code. However, the increase in institutional ownership and outside directors do not promote risk-taking behavior and improve firm performance.

Keywords

corporate governance Japanese firms board of directors institutional investors

Type: Chapter
Information: The Political Economy of the Abe Government and Abenomics Reforms , pp. 357 - 393

DOI: https://doi.org/10.1017/9781108921145.012 [Opens in a new window]

Publisher: Cambridge University Press

Print publication year: 2021

Access options

Get access to the full version of this content by using one of the access options below. (Log in options will check for institutional or personal access. Content may require purchase if you do not have access.)

References

Aggarwal, R., Erel, I., Ferreira, M., and Matos, P.. 2011. “Does governance travel around the world? Evidence from institutional investors.” Journal of Financial Economics 100: 154–181.Google Scholar

Almeida, H., Fos, V., and Kronlund, M.. 2016. “The real effects of share repurchases.” Journal of Financial Economics 119: 168–185.Google Scholar

Aoki, M. 2010. Corporations in Evolving Diversity: Cognition, Governance, and Institutions. Oxford: Oxford University Press.Google Scholar

Aoki, M., Jackson, G., and Miyajima, H.. 2007. Corporate Governance in Japan: Institutional Change and Organizational Diversity. Oxford: Oxford University Press.Google Scholar

Crane, A., Michenaud, S., and Weston, J.. 2016. “The effect of institutional ownership on payout policy: Evidence from index thresholds.” Review of Financial Studies 29: 1377–1408.Google Scholar

Becht, M., Franks, J., Grant, J., and Wagner, H., 2017. “The returns to hedge fund activism: An international study.” Review of Financial Studies 30: 2933–2971.Google Scholar

Buchanan, J., Chai, D., and Deakin, S.. 2012. Hedge Fund Activism in Japan: The Limits of Shareholder Primacy. Cambridge: Cambridge University Press.Google Scholar

Duchin, R., Matsusaka, J., and Ozbas, O.. 2010. “When are outside directors effective?” Journal of Financial Economics 96: 195–214.Google Scholar

Edmans, A., Fang, V., and Huang, A. H.. 2018. “The long-term consequences of short-term incentives.” ECGI Finance Working Paper, 527.Google Scholar

Fauver, L., Hung, M., Li, X., and Taboada, A.. 2017. “Board reforms and firm value: Worldwide evidence.” Journal of Financial Economics 125: 120–142.CrossRef Google Scholar

Ferreira, M., and Matos, P.. 2008. “The colors of investors’ money: The role of institutional investors around the world.” Journal of Financial Economics 88: 499–533.Google Scholar

Franks, J., Mayer, C., and Miyajima, H.. 2014. “The ownership of Japanese corporations in the 20th century.” Review of Financial Studies 27: 2580–2625.Google Scholar

Gombers, P., and Metrick, A.. 2001. “Institutional investors and equity prices.” Quarterly Journal of Economics 116: 229–259.Google Scholar

Gordon, J. 2007. “The rise of independent directors in the United States, 1950-2005: Of shareholder value and stock market prices.” Stanford Law Review 59: 1465–1568.Google Scholar

Grinstein, Y., and Michaely, R.. 2005. Institutional holdings and payout policy. Journal of Finance 60: 1389–1426.Google Scholar

Hamao, Y., and Matos, P.. 2018. “US-Style Investor Activism in Japan: The First Ten Years.” Journal of the Japanese and International Economies 48: 29–54.Google Scholar

Hoshi, T., and Kashyap, A.. 2004. “Japan’s Economic and Financial Crisis: An Overview.” Journal of Economic Perspectives 18: 3–26.Google Scholar

Ikeda, N., Inoue, K., and Watanabe, S.. 2018. “Enjoying the quiet life: Corporate decision-making by entrenched managers.” Journal of the Japanese and International Economies 47: 55–69.Google Scholar

Jacoby, S. 2010. “Foreign Investors and Corporate Governance in Japan: The Case of CalPERS.” In Corporate Governance and Managerial Reforms in Japan, edited by Whittaker, H. and Deakin, S., pp.93–133. Oxford: Oxford University Press.Google Scholar

Jackson, G., and Miyajima, H.. 2007. “Introduction: The diversity and change of corporate governance in Japan.” In Corporate Governance in Japan: Institutional Change and Organizational Diversity, edited by Aoki, M., Jackson, G., and Miyajima, H., pp.1–47. Oxford: Oxford University Press.Google Scholar

Jidinger, J., and Miyajima, H.. 2019. “Does regulation matter? Effects of the corporate governance reforms on the relational shareholdings in Japan.” RIETI Discussion Paper Series 20-E-003.Google Scholar

Kay, J. 2012. “The Kay Review of UK Equity Market and Long-term Decision Making.” Investor Management Association.Google Scholar

Milhaupt, C. 2017. “Evaluating Abe’s Third Arrow: How Significant are Japan’s Recent Corporate Governance Reforms?” Columbia Law and Economics Working Paper, no. 561.Google Scholar

Miyajima, H., and Kuroki, F.. 2007. “The unwinding of cross-shareholding in Japan: Causes, effects, and implications.” In Corporate Governance in Japan: Institutional Change and Organizational Diversity, edited by Aoki, M., Jackson, G., and Miyajima, H., pp.79–124. Oxford: Oxford University Press.Google Scholar

Miyajima, H., Ogawa, R., and Saito, T.. 2018. “Changes in corporate governance and top executive turnover: The evidence from Japan.” Journal of the Japanese and International Economies 47: 17–31.Google Scholar

Miyajima, H., and Suzuki, K.. 2018. “Investment Behaviors of Japanese Insurance Firms from 1990–2015.” Mimeo.Google Scholar

OECD. 2012. “Corporate Governance, Value Creation and Growth: The Bridge Between Finance and Enterprise.” OECD Publishing.Google Scholar

Porter, M. E. 1992. “Capital disadvantage: America’s failing capital investment system.” Harvard Business Review 70(5): 65–82.Google Scholar

Porter, M. E. 1994. Capital Choices. Cambridge, MA: Harvard University Press.Google Scholar

Shishido, Z. 2007. “The Turnaround of 1997: Changes in Japanese Corporate Law and Governance.” In Corporate Governance in Japan: Institutional Change and Organizational Diversity, edited by Aoki, M., Jackson, G., and Miyajima, H., pp.310–329. Oxford: Oxford University Press.Google Scholar

Shleifer, A., and Vishny, R.. 1990. “Equilibrium short horizons of investors and firms.” American Economic Review 80: 148–153.Google Scholar

Stein, J. 1988. “Takeover threats and managerial myopia.” Journal of Political Economy 96: 61–80.Google Scholar

Tanaka, W. 2017. “Current state and outlook of corporate governance reform – With a focus on the board of directors’ system.” Working paper at Waseda University: WCG WP #2017–002.Google Scholar

Book contents

12 - Corporate Governance Reforms under Abenomics

Summary

Keywords

Access options

References

Save book to Kindle

Save book to Dropbox

Save book to Google Drive