The Value of Prominent Directors: Corporate Governance and Bank Access in Transitional Japan

Posted: 7 Mar 2002

See all articles by J. Mark Ramseyer

J. Mark Ramseyer

Harvard Law School

Yoshiro Miwa

Osaka Gakuin University


Although some observers urge modern transitional economies to rely on bank finance rather than stock markets, in "transitional" Japan at the opening of the 20th century large firms did not rely on debt. Instead, they raised their funds through the stock market, and took a variety of steps to mitigate the agency slack involved. As one of those steps, they sometimes recruited prominent investors to their boards.

We explore the value of director prominence. More precisely, we use data on firms in the cotton-spinning industry in early 20th century Japan to explore the relationship between board composition and firm profitability. First, we find that firms who hired prominent directors had higher profits than their competitors in succeeding years. We hypothesize that these prominent directors brought basic monitoring skills and certifying credibility: they knew what to expect of the firms, knew when and how to intervene, and had the reputations necessary to certify firm quality credibly. Second, we find that firms did not further increase their profitability by appointing directors with access to a bank or to spinning technology. We conclude that the firms probably had access to funds and technological assistance without connections through the board.

Suggested Citation

Ramseyer, J. Mark and Miwa, Yoshiro, The Value of Prominent Directors: Corporate Governance and Bank Access in Transitional Japan. Available at SSRN:

J. Mark Ramseyer (Contact Author)

Harvard Law School ( email )

1575 Massachusetts
Hauser 406
Cambridge, MA 02138
United States
617-496-4878 (Phone)
617-496-6118 (Fax)

Yoshiro Miwa

Osaka Gakuin University ( email )

2-36-1 Kishibe-Minami
Suita, Osaka 5645811

Here is the Coronavirus
related research on SSRN

Paper statistics

Abstract Views
PlumX Metrics