Japanese Corporate Governance from the Perspective of Family Firms

16 Pages Posted: 19 Jul 2016

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: July 18, 2016

Abstract

Corporate governance has been a hot issue across the world, especially since the Enron scandal and the Lehman shock. The Anglo-Saxon model (A-form), which focuses on monitoring management to maximize shareholder value through mechanisms such as hostile takeovers and independent directors, is often criticized as either malfunctioning or short-sighted.

The Japanese model (J-form) differs markedly from the Anglo-Saxon model: there is stronger capacity for internal governance, there exist mechanisms such as “lifetime” employment to incentivize human capital providers, there is greater internal promotion, and shareholder intervention can be limited through cross-shareholding practices. These differences were once cited to explain Japan’s economic miracle, but were also cited as a major factor behind the lost decades of the 1990s and 2000s.

In fact, after the bubble economy of the mid-1980s, the ROAs of Japanese companies declined and were lower than that of Anglo-Saxon companies. Interestingly, Japanese family (J-family) firms have performed better than ordinary J-form firms, particularly after the economic bubble.

This paper attempts to answer the questions: why have the performances of J-form firms deteriorated since the Japanese economic bubble in the mid-1980s, and why have J-family firms generally outperformed non-family firms? The paper will analyze and compare J-form and J-family firms on general issues of corporate governance, including internal and external governance, internal promotion rules, long-run reward systems, and incentive mechanisms.

Keywords: family firm, corproate governance, Japan

JEL Classification: C32, C34

Suggested Citation

Dazai, Hokuto and Saito, Takuji and Shishido, Zenichi and Yanagawa, Noriyuki, Japanese Corporate Governance from the Perspective of Family Firms (July 18, 2016). Available at SSRN: https://ssrn.com/abstract=2811069 or http://dx.doi.org/10.2139/ssrn.2811069

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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