Political Intervention, Corporate Governance and Firm Performance: An Empirical Investigation in Japan and Taiwan

53 Pages Posted: 4 Mar 2009 Last revised: 5 Sep 2010

See all articles by Hsin-Yi Yu

Hsin-Yi Yu

University of Edinburgh - Organisation Studies; National University of Kaohsiung; University of Edinburgh - Accounting and Finance

Brian G. M. Main

University of Edinburgh

Date Written: September 1, 2010

Abstract

This paper investigates the interaction of government and financial institutions in the operation of a company through the relationship of the main bank system and the system of amakudari (appointing retired bureaucrats to the boards of public companies). Consistent with resource dependency theory, the empirical results suggest that governments and financial institutions tend to appoint representatives to the board in order to help troubled companies. However, a negative relationship is established between the presence of such amakudari and subsequent firm performance. Thus, while the system of amakudari may use its influence in an attempt to save troubled companies, it is possible that, contrary to resource dependency theory but consistent with agency theory, the monitoring ability of the board may consequently be jeopardized to the detriment of overall firm performance.

Keywords: Corporate Governance, Business/Government relations, Performance, Amakudari

JEL Classification: G32, G34, J33

Suggested Citation

Yu, Hsin-Yi and Main, Brian G. M., Political Intervention, Corporate Governance and Firm Performance: An Empirical Investigation in Japan and Taiwan (September 1, 2010). Available at SSRN: https://ssrn.com/abstract=1352942 or http://dx.doi.org/10.2139/ssrn.1352942

Hsin-Yi Yu (Contact Author)

University of Edinburgh - Organisation Studies ( email )

50 George Square
William Robertson Building
Edinburgh EH8 9JY
UNITED KINGDOM

National University of Kaohsiung ( email )

Kaohsiung, 803
Taiwan

University of Edinburgh - Accounting and Finance ( email )

William Robertson Building
Edinburgh EH8 9JY
United Kingdom

Brian G. M. Main

University of Edinburgh ( email )

50 George Square
Edinburgh, Scotland EH8 9JY
United Kingdom
(44)-131-650-8360 (Phone)

HOME PAGE: http://homepages.ed.ac.uk/mainbg/

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