Corporate Governance and Corporate Behavior in Japan

1. Front Matter

   Pages i-xi

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2. Introduction

   • Masaharu Hanazaki

   Pages 1-3

3. Institutional Characteristics and Effects of a Stock Option

   • Masaharu Hanazaki

   Pages 5-13

4. Empirical Analysis of a Stock Option

   • Masaharu Hanazaki

   Pages 15-30

5. Related Studies of Corporate Diversification

   • Masaharu Hanazaki

   Pages 31-36

6. Corporate Diversification of Japanese Firms

   • Masaharu Hanazaki

   Pages 37-45

7. Empirical Analyses of Corporate Diversification and Division of Corporations

   • Masaharu Hanazaki

   Pages 47-75

8. Main Results and Their Interpretation

   • Masaharu Hanazaki

   Pages 77-80

9. Back Matter

   Pages 81-88

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This book carefully examines the effects of changes in the corporate governance structure on corporate behavior or company performance, using micro-data from listed companies in Japan. The author found that in Japan the introduction of stock options had neither a positive impact on profitability nor the negative side effects of promoting risk-taking behaviors. Furthermore, he found that corporate diversification and division of corporations showed negative impacts on profitability.

The corporate governance structure of Japan has exhibited a large change from the second half of the 1990s to the present. There have been institutional reforms involving enterprise law, such as the introduction of stock options and the removal of the ban on holding companies. With respect to the ownership structure of a company, discernible trends are that the equity holdings of financial institutions and business corporations have fallen while the presence of foreign stockholders has risen.These trends are often pointed out as signs that the Japanese corporate governance structure has been approaching the American model and that this will energize Japanese firms.

The author contradicts common academic theories, however, and concludes that the formation of the corporate governance which emphasizes the agency problem between shareholders and corporate managers is inadequate. He suggests that an institutional arrangement for a corporate governance system that values a variety of stakeholders' interests is greatly needed and concludes that perspectives on maximizing surplus values for various stakeholders and distributing the surpluses appropriately among the stakeholders will become increasingly important for the purpose of managing corporations.

• corporate diversification
• corporate governance
• corporate governance in Japan
• corporate performance
• stock options

• Hitotsubashi University, Kunitachi, Tokyo, Japan

  Masaharu Hanazaki

Masaharu Hanazaki is a professor at the Graduate School of Commerce and Management, Hitotsubashi University. He graduated from Waseda University in 1979 and joined the Japan Development Bank. He was a Director General and the Executive Director of the Research Institute of Capital Formation of the Development Bank of Japan (DBJ) from October 2003 to March 2012. After retiring from the DBJ in March 2012, he immediately assumed his current position at Hitotsubashi University. His main fields of research are corporate finance, corporate governance, financial systems, and the Japanese economy. His major English articles include:

 

“Corporate Governance and Investment in East Asian Firms—Empirical Analysis of Family-Controlled Firms” (with Qun Liu), Journal of Asian Economics, 18, 76–97, 2007

 

“A Review of Japan’s Bank Crisis from the Governance Perspective” (with Akiyoshi Horiuchi), Pacific-Basin Finance Journal, 11, 305–325, 2003

 

“Is Japan’s Financial System Efficient?” (with Akiyoshi Horiuchi) Oxford Review of Economic Policy, Vol. 16, No. 2, 61–73, 2000

 

His English book publications include:

 

Designing Financial Systems in East Asia and Japan, (Joseph P. H. Fan, Masaharu Hanazaki, and Juro Teranishi, eds.) Routledge Curzon, 2004

 

“A Vacuum of Governance in Japanese Bank Management,” (with Akiyoshi Horiuchi) in Banking, Capital Markets and Corporate Governance (Hiroshi Osano and Toshiaki Tachibanaki, eds.), Palgrave, pp. 133–180, 2001

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