Alternative corporate governance systems in Japanese firms

Implications for a shift to stockholder-centered corporate governance

Toru Yoshikawa, Phillip Phan

Research output: Contribution to journalArticle

Abstract

In Asia, the recent catastrophic decline in regional stock markets, continuing currency crisis and failures of major financial institutions and industrial corporations have increased domestic and international interest in corporate governance. Nowhere is this greater than in Japan where financial institution reform has catapulted this to the fore. In this paper, we use agency theory and institutional theory, together with comparative case examples, to derive some propositions on the dynamics of changing corporate governance systems in Japanese firms. We argue for the co-existence of stakeholder and shareholder-centered corporate governance systems in Japan. This argument has an important implication for corporate governance research and agency theory. Namely, changes in ownership structure and institutional expectations would force firms to focus on maximizing shareholder value even where the interests of stakeholders are more emphasized. It suggests an environmental selection mechanism to ensure the emergence of appropriate corporate governance mechanisms to solve the agency problem. Further, the loss of competitiveness and the prolonged poor performance of firms can change the institutional norms to emphasize asset efficiency and transparency rather than stability and business ties.

Original languageEnglish (US)
Pages (from-to)183-205
Number of pages23
JournalAsia Pacific Journal of Management
Volume18
Issue number2
StatePublished - 2001
Externally publishedYes

Fingerprint

Japanese firms
Corporate governance
Stockholders
Agency theory
Financial institutions
Japan
Stakeholders
Currency crises
Coexistence
Shareholders
Stock market
Agency problems
Asia
Ownership structure
Corporate governance mechanisms
Shareholder value
Assets
Transparency
Institutional theory
Competitiveness

ASJC Scopus subject areas

  • Business, Management and Accounting (miscellaneous)
  • Economics, Econometrics and Finance (miscellaneous)
  • Business and International Management

Cite this

@article{28e1e4391d824a949ff6176e5e45c08e,
title = "Alternative corporate governance systems in Japanese firms: Implications for a shift to stockholder-centered corporate governance",
abstract = "In Asia, the recent catastrophic decline in regional stock markets, continuing currency crisis and failures of major financial institutions and industrial corporations have increased domestic and international interest in corporate governance. Nowhere is this greater than in Japan where financial institution reform has catapulted this to the fore. In this paper, we use agency theory and institutional theory, together with comparative case examples, to derive some propositions on the dynamics of changing corporate governance systems in Japanese firms. We argue for the co-existence of stakeholder and shareholder-centered corporate governance systems in Japan. This argument has an important implication for corporate governance research and agency theory. Namely, changes in ownership structure and institutional expectations would force firms to focus on maximizing shareholder value even where the interests of stakeholders are more emphasized. It suggests an environmental selection mechanism to ensure the emergence of appropriate corporate governance mechanisms to solve the agency problem. Further, the loss of competitiveness and the prolonged poor performance of firms can change the institutional norms to emphasize asset efficiency and transparency rather than stability and business ties.",
author = "Toru Yoshikawa and Phillip Phan",
year = "2001",
language = "English (US)",
volume = "18",
pages = "183--205",
journal = "Asia Pacific Journal of Management",
issn = "0217-4561",
publisher = "Springer New York",
number = "2",

}

TY - JOUR

T1 - Alternative corporate governance systems in Japanese firms

T2 - Implications for a shift to stockholder-centered corporate governance

AU - Yoshikawa, Toru

AU - Phan, Phillip

PY - 2001

Y1 - 2001

N2 - In Asia, the recent catastrophic decline in regional stock markets, continuing currency crisis and failures of major financial institutions and industrial corporations have increased domestic and international interest in corporate governance. Nowhere is this greater than in Japan where financial institution reform has catapulted this to the fore. In this paper, we use agency theory and institutional theory, together with comparative case examples, to derive some propositions on the dynamics of changing corporate governance systems in Japanese firms. We argue for the co-existence of stakeholder and shareholder-centered corporate governance systems in Japan. This argument has an important implication for corporate governance research and agency theory. Namely, changes in ownership structure and institutional expectations would force firms to focus on maximizing shareholder value even where the interests of stakeholders are more emphasized. It suggests an environmental selection mechanism to ensure the emergence of appropriate corporate governance mechanisms to solve the agency problem. Further, the loss of competitiveness and the prolonged poor performance of firms can change the institutional norms to emphasize asset efficiency and transparency rather than stability and business ties.

AB - In Asia, the recent catastrophic decline in regional stock markets, continuing currency crisis and failures of major financial institutions and industrial corporations have increased domestic and international interest in corporate governance. Nowhere is this greater than in Japan where financial institution reform has catapulted this to the fore. In this paper, we use agency theory and institutional theory, together with comparative case examples, to derive some propositions on the dynamics of changing corporate governance systems in Japanese firms. We argue for the co-existence of stakeholder and shareholder-centered corporate governance systems in Japan. This argument has an important implication for corporate governance research and agency theory. Namely, changes in ownership structure and institutional expectations would force firms to focus on maximizing shareholder value even where the interests of stakeholders are more emphasized. It suggests an environmental selection mechanism to ensure the emergence of appropriate corporate governance mechanisms to solve the agency problem. Further, the loss of competitiveness and the prolonged poor performance of firms can change the institutional norms to emphasize asset efficiency and transparency rather than stability and business ties.

UR - http://www.scopus.com/inward/record.url?scp=0041809681&partnerID=8YFLogxK

UR - http://www.scopus.com/inward/citedby.url?scp=0041809681&partnerID=8YFLogxK

M3 - Article

VL - 18

SP - 183

EP - 205

JO - Asia Pacific Journal of Management

JF - Asia Pacific Journal of Management

SN - 0217-4561

IS - 2

ER -