Lawyers, Yakuza and Zombie Firms: A Quasi-Natural Experiment

32 Pages Posted: 28 Oct 2016

See all articles by Paolo Campana

Paolo Campana

Institute of Criminology, University of Cambridge

Ken Okamura

University of Oxford - Said Business School

Date Written: October 19, 2016

Abstract

In the aftermath of the bursting of Japan’s “Bubble” economy and the subsequent banking crisis of 1997, we find it is possible to have “too few lawyers”. The decline of extra-legal resolution of financial distress via banks’ suspension of banking transactions leads to an increase in yakuza numbers as “dark side” private ordering increases and there is an increase in loss-making “zombie” firms. Japanese legal reforms in 2002 lead to a significant increase in lawyer numbers. These new lawyers play an economically significant role in reducing the number of “zombie” firms in Japan and the yakuza’s involvement in civil disputes. Using a panel of 47 prefectures we find new lawyers lead to a rise in the dissolution and liquidation of firms and a reduction in the number of loss-making “zombie” firms, as well as a reduction in crimes associated with yakuza involvement in civil dispute resolution.

Keywords: financial distress, lawyers, organized crime, Japan

Suggested Citation

Campana, Paolo and Okamura, Ken, Lawyers, Yakuza and Zombie Firms: A Quasi-Natural Experiment (October 19, 2016). Saïd Business School WP 2016-24, Available at SSRN: https://ssrn.com/abstract=2860676 or http://dx.doi.org/10.2139/ssrn.2860676

Paolo Campana (Contact Author)

Institute of Criminology, University of Cambridge ( email )

University of Cambridge
Sidgwick Avenue
Cambridge, CB3 9DA
United Kingdom
+44 1223 767375 (Phone)

Ken Okamura

University of Oxford - Said Business School ( email )

Park End Street
Oxford, OX1 1HP
Great Britain
44-1865614825 (Phone)

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