Unexpected Corporate Outcomes from Hedge Fund Activism in Japan

42 Pages Posted: 19 Jan 2018 Last revised: 23 Jan 2018

See all articles by John Buchanan

John Buchanan

University of Cambridge - Centre for Business Research (CBR)

Dominic Heesang Chai

University of Manchester - Manchester Business School; University of Cambridge - Centre for Business Research (CBR)

Simon Deakin

University of Cambridge - Centre for Business Research (CBR); European Corporate Governance Institute (ECGI); University of Cambridge - Faculty of Law

Date Written: January 19, 2018

Abstract

Hedge fund activism has been identified in the USA as a driver of enduring corporate governance change and market perception. We investigate this claim in an empirical study to see whether activism produced similar results in Japan in four representative areas: management effectiveness, managerial decisions, labour management, and market perception. Experience from the USA would predict positive changes at Japanese target companies in these four areas. However, analysis of financial data shows that no enduring changes were apparent in the first three areas, and that market perception was consistently unfavourable. Our findings demonstrate that the same pressures need not produce the same results in different markets. Moreover, while the effects of the global financial crisis should not be ignored, we conclude that the country-level differences in corporate governance identified in the varieties of capitalism literature are robust, at least in the short term.

Keywords: Corporate Governance, Japan, Institutions, Finance

JEL Classification: G23, K22, P52

Suggested Citation

Buchanan, John and Chai, Dominic H. and Deakin, Simon F., Unexpected Corporate Outcomes from Hedge Fund Activism in Japan (January 19, 2018). University of Cambridge Faculty of Law Research Paper No. 10/2018; European Corporate Governance Institute (ECGI) - Law Working Paper No. 383/2018. Available at SSRN: https://ssrn.com/abstract=3105257 or http://dx.doi.org/10.2139/ssrn.3105257

John Buchanan

University of Cambridge - Centre for Business Research (CBR) ( email )

Top Floor, Judge Business School Building
Trumpington Street
Cambridge, CB2 1AG
United Kingdom

Dominic H. Chai (Contact Author)

University of Manchester - Manchester Business School ( email )

Booth Street West
Manchester, M15 6PB
United Kingdom

University of Cambridge - Centre for Business Research (CBR) ( email )

Top Floor, Judge Business School Building
Trumpington Street
Cambridge, CB2 1AG
United Kingdom

Simon F. Deakin

University of Cambridge - Centre for Business Research (CBR) ( email )

Top Floor, Judge Business School Building
Trumpington Street
Cambridge, CB2 1AG
United Kingdom
+ 44 1223 335243 (Phone)

European Corporate Governance Institute (ECGI)

c/o ECARES ULB CP 114
B-1050 Brussels
Belgium

HOME PAGE: http://www.ecgi.org

University of Cambridge - Faculty of Law ( email )

10 West Road
Cambridge, CB3 9DZ
United Kingdom

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