Increasing shareholder focus: the repercussions of the 2015 corporate governance reform in Japan

AbstractThe corporate governance reform promulgated in 2015 in Japan has contributed to a substantial increase of board independence and a reduction of average board tenure. Our empirical analysis covering 3405 public companies demonstrates that reinvigorated corporate oversight and an increasing post-reform shift towards prioritization of shareholder value have led to a persistent increase of corporate profitability, asset productivity, dividend payouts, acquisitions’ value, and valuation multiples. We also document a significant increase of sensitivity of executives’ and directors’ compensations to the dynamics of firms’ bottom lines. The positive changes are the most pronounced within companies where independent directors constitute a majority on the board. The most notable drawbacks of the reform are a significant reduction in net employment creation and in employee turnover within the largest companies. These might be a possible reason for the documented improvement in corporate performance. The number of part-time employees has also seen a significant increase. While being prima facie focused on reinvigorating the private sector, the corporate governance reform may implicitly undermine the established social contract based on job security. Therefore, our study is important from the perspective of sustainable development of the corporate sector as it demonstrates that while concentrating on improving corporate governance, it is also necessary to consider the business’ social responsibility.

Download Full-text

When Is a Governmental Mandate not a Mandate? Predicting Organizational Compliance Under Semicoercive Conditions

Journal of Management ◽

10.1177/0149206320948579 ◽

2020 ◽

pp. 014920632094857

Author(s):

Xuanli Xie ◽

Wei Shen ◽

Edward J. Zajac

Keyword(s):

Corporate Governance ◽

Social Context ◽

Theoretical Approach ◽

Specific Form ◽

Differential Sensitivity ◽

Independent Directors ◽

Future Research ◽

Governance Reform ◽

Corporate Governance Reform ◽

Organizational Compliance

While institutional theorists have long viewed governmental mandates as a prototypical coercive pressure generating homogeneous organizational compliance, we suggest that such mandates are often subject to enforcement uncertainty, resulting in a pressure more aptly characterized as “semicoercive” and a compliance result more aptly characterized as heterogeneous. We advance and test a theoretical framework to predict the specific form of heterogeneous compliance in semicoercive contexts, with particular attention to the differential sensitivity of firms to pressures to comply, based on differences in their specific legal, political, and social context. We use the setting of a mandated corporate governance reform in China requiring listed Chinese firms to add independent directors and find general evidence of noncompliance and more specific evidence consistent with the predictions from our sociopolitical framework. We discuss the implications of our theoretical approach and findings for future research on institutional environments, governmental regulations, organizational compliance, and corporate governance.

Download Full-text

The Value of Outside Directors: Evidence from Corporate Governance Reform in Korea

Journal of Financial and Quantitative Analysis ◽

10.1017/s0022109000003458 ◽

2007 ◽

Vol 42 (4) ◽

pp. 941-962 ◽

Cited By ~ 225

Author(s):

Jongmoo Jay Choi ◽

Sae Woon Park ◽

Sean Sehyun Yoo

Keyword(s):

Corporate Governance ◽

Financial Crisis ◽

Asian Financial Crisis ◽

Independent Directors ◽

Board Composition ◽

Governance Reform ◽

Outside Directors ◽

Family Control ◽

Indigenous Institutions ◽

Corporate Governance Reform

AbstractThis paper examines the valuation impacts of outside independent directors in Korea, where a regulation requiring outside directors was instituted after the Asian financial crisis. In contrast to studies of U.S. firms, the effects of independent directors on firm performance are strongly positive. Foreigners also have positive impacts. The effects of indigenous institutions such as chaebol or family control are insignificant or negative. This implies that the effect of outsiders depends on board composition as well as the nature of the market in which the firm operates.

Download Full-text

The 1970s

10.1093/oso/9780190640323.003.0003 ◽

2018 ◽

Author(s):

Brian R. Cheffins

Keyword(s):

Corporate Governance ◽

Reform Process ◽

Governance Reform ◽

Public Companies ◽

Managerial Capitalism ◽

Corporate Governance Reform ◽

Process Oriented ◽

Large Corporations

Chapter 3 addresses the 1970s, a decade when managerial capitalism continued to prevail in large American public companies but the scene was being set for its displacement. Confidence in large corporations and the executives running them suffered due to American businesses losing ground to foreign challengers, setbacks affecting prominent conglomerates, and revelations of illicit payments by numerous well-known corporations. The difficulties afflicting 1970s public companies helped to set in motion a corporate governance reform process oriented around improving managerial accountability which continues to this day. Regulation of business increased considerably during the opening half of the decade but erosion of faith in government ultimately undermined continued momentum in this direction.

Download Full-text