Corporate Governance, Employment, and Financial Performance of Japanese Firms: A Cross-Country Analysis

35 Pages Posted: 14 Feb 2019

See all articles by Yasuhiro Arikawa

Yasuhiro Arikawa

Waseda University - Graduate School of Business and Finance

Kotaro Inoue

School fo Engineering, Tokyo Institute of Technology

Takuji Saito

Graduate School of Business Administration, Keio University

Date Written: January 9, 2019

Abstract

This study examines whether the sustained lower profitability and market valuation of Japanese firms compared to global peer firms can be explained by the structure of insider dominate board of directors and the employment system which hinders flexible employment adjustments by using cross-country data. Firstly we show that level of outside director ratio and flexibility of employment adjustment both differ consistently across 27 countries in the analyzed period. We show that these two factors significantly explain observed variation of financial performance across countries significantly. In addition, we show that not only do these two factors have significant explanation power over the relatively poor performance of Japanese firms, but also over the better financial performance and growth rate of US firms.

Keywords: Corporate Governance, Labor Law, Cross-country analysis, Japan

JEL Classification: G34, G38, O57

Suggested Citation

Arikawa, Yasuhiro and Inoue, Kotaro and Saito, Takuji, Corporate Governance, Employment, and Financial Performance of Japanese Firms: A Cross-Country Analysis (January 9, 2019). Available at SSRN: https://ssrn.com/abstract=3312515 or http://dx.doi.org/10.2139/ssrn.3312515

Yasuhiro Arikawa

Waseda University - Graduate School of Business and Finance ( email )

Bldg.26, 1-6-1,
Nishiwaseda
Shinjuku-ku, Tokyo, 1698050
Japan

Kotaro Inoue (Contact Author)

School fo Engineering, Tokyo Institute of Technology ( email )

2-12-1 Ookayama, Muguro-ku
Tokyo, 152-8552
Japan

Takuji Saito

Graduate School of Business Administration, Keio University ( email )

Japan

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