Appointments of Outsiders to Japanese Boards: Determinants and Implications for Managers
Steven N. Kaplan
University of Chicago - Booth School of Business; National Bureau of Economic Research (NBER)
Bernadette A. Minton
Ohio State University (OSU) - Department of Finance
This paper investigates the determinants of appointments of outsiders -- directors previously employed by banks (bank directors) or by other nonfinancial firms (corporate directors) -- to the boards of large nonfinancial Japanese corporations. Such appointments increase with poor stock performance; those of bank directors also increase with earnings losses. Turnover of incumbent top executives increases substantially in the year of both types of outside appointments. We perform a similar analysis for outside appointments in large U.S. firms and find different patterns. We conclude that banks and corporate shareholders play an important monitoring and disciplinary role in Japan.
JEL Classification: G32. G21, D23working papers series
Date posted: August 10, 1999
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