The Rising Son Under the Shadow of Company Communities: Do Japanese Family Firms Really Excel?

18 Pages Posted: 22 Aug 2015

See all articles by Hokuto Dazai

Hokuto Dazai

Nagoya University of Commerce and Business

Takuji Saito

Waseda University

Zenichi Shishido

Hitotsubashi University Graduate School of Law; Independent

Noriyuki Yanagawa

University of Tokyo - Faculty of Economics

Date Written: August 20, 2015

Abstract

Japanese corporate governance has long attracted attention from scholars due to its stark differences from the Anglo-Saxon model. Indeed, scholars have pointed to the unique aspects of Japanese governance to explain Japan’s economic miracle, only to reverse their view, citing it as a major factor behind the lost decades of the ‘90s and ‘00s. A recent study by Mehrotra, Morck, Shim, and Wiwattanakantang (2013) brings Japanese economic governance back into the spotlight. In their analysis of family-run firms, the authors find that although inherited control is linked to poor firm performance in other developed economies, heir-run firms actually perform well in Japan. In search of a convincing explanation for this finding, we studied the same sample of firms over the same period and reached varying results. Our paper relies on the concept of a “company community” to explain why Japanese family firms appear to outperform non-family firms. The company community, consisting of management and shareholders, is the core of the Japanese non-family listed firm. Japanese family firms, on the other hand, modify the characteristics of the company community to avoid critical defects in monitoring, incentives, and external labor markets. Rather than concluding that Japanese family firms performed well, the more plausible explanation may be that Japanese listed firms on the whole performed badly.

Keywords: family firm, corporate governance, company community

JEL Classification: C32, C34

Suggested Citation

Dazai, Hokuto and Saito, Takuji and Shishido, Zenichi and Yanagawa, Noriyuki, The Rising Son Under the Shadow of Company Communities: Do Japanese Family Firms Really Excel? (August 20, 2015). Available at SSRN: https://ssrn.com/abstract=2648590 or http://dx.doi.org/10.2139/ssrn.2648590

Hokuto Dazai

Nagoya University of Commerce and Business ( email )

Nissin
Komenoki-cho
Sagamine 4-4, Aichi-ken 470-0193
Japan

Takuji Saito

Waseda University ( email )

Okhubo Campus, Shinjuku-ku, Room 59-416B
Tokyo, Tokyo 169-8555
Togo

Zenichi Shishido (Contact Author)

Hitotsubashi University Graduate School of Law ( email )

2-1-2 Hitotsubashi
Chiyoda-ku, Tokyo 101-8439
Japan
81-(0)3-4212-3148 (Phone)
81-(0)3-4212-3149 (Fax)

Independent ( email )

No Address Available
United States

Noriyuki Yanagawa

University of Tokyo - Faculty of Economics ( email )

7-3-1 Hongo, Bunkyo-ku
Tokyo 113-0033
Japan

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