Corporate Governance Compliance and Herding

35 Pages Posted: 23 Oct 2019 Last revised: 2 Feb 2022

See all articles by Masanori Orihara

Masanori Orihara

University of Tsukuba

Arman Eshraghi

Cardiff Business School

Date Written: January 7, 2022


The international corporate governance literature generally regards ‘comply-or-explain’ regimes as positive. By examining the recent Japanese governance reforms, we show these policies have inadvertently led to overcompliance by target firms and, importantly, non-target firms. The latter group mimicked the compliance behavior of sector-leading firms, and this herding was to the detriment of their shareholder value. The growing demand for and the limited supply of qualified outside directors led firms to appoint individuals with lower advising ability such as busy directors. We also find a larger reduction in the market value of small and R&D intensive firms, and those with low foreign ownership and high retail ownership. These findings have important implications for the international governance literature regarding the ineffectiveness of one-size-fits-all regulation even when it is voluntary.

Keywords: Corporate governance, Compliance, Herding, Outside Directors, Japan

JEL Classification: G34, M14

Suggested Citation

Orihara, Masanori and Eshraghi, Arman, Corporate Governance Compliance and Herding (January 7, 2022). International Review of Financial Analysis, 2022, Vol. 80: 102029, Available at SSRN: or

Masanori Orihara

University of Tsukuba ( email )



Arman Eshraghi (Contact Author)

Cardiff Business School ( email )

Colum Drive
Cardiff, CF10 3EU
United Kingdom

Do you have a job opening that you would like to promote on SSRN?

Paper statistics

Abstract Views
PlumX Metrics