Outsourcing Active Ownership in Japan

39 Pages Posted: 11 Jun 2021

See all articles by Marco Becht

Marco Becht

Solvay Brussels School of Economics and Management (ULB); European Corporate Governance Institute (ECGI); Centre for Economic Policy Research (CEPR)

Julian R. Franks

London Business School - Institute of Finance and Accounting; Centre for Economic Policy Research (CEPR); European Corporate Governance Institute (ECGI)

Hideaki Miyajima

Waseda University - Graduate School of Commerce; Research Institute of Economy, Trade and Industry (RIETI)

Kazunori Suzuki

Waseda University, Graduate School of Business and Finance; European Corporate Governance Institute (ECGI)

Date Written: May 31, 2021

Abstract

This paper examines active ownership in Japan by an equity ownership service, Governance for Owners Japan (GOJ). GOJ engages with portfolio companies on behalf of Japanese and international institutional investors. The engagements are exclusively private and are not observable to the public. We use the stated objectives of the interventions to measure the incidence of success, and the stock market response to the public announcement of engagement outcomes. We find a high rate of success and average cumulative abnormal returns (CARs) of about 2.6 percent between -5 and +5 of an event date in response to outcome announcements. Since there is more than one outcome per engagement, the average CARs per engagement is 6.5 percent. Target companies were more likely to adopt recommendations proposed in GOJ’s private engagements than in a sample of public activist engagements over a similar time period.

Keywords: Corporate Governance, Active Ownership, Investor Stewardship, Private Engagement, Hedge Fund Activism, Corporate Governance Code

JEL Classification: G34, G38, K20

Suggested Citation

Becht, Marco and Franks, Julian R. and Miyajima, Hideaki and Suzuki, Kazunori (Icko), Outsourcing Active Ownership in Japan (May 31, 2021). European Corporate Governance Institute – Finance Working Paper No. 766/2021, Available at SSRN: https://ssrn.com/abstract=3864310 or http://dx.doi.org/10.2139/ssrn.3864310

Marco Becht

Solvay Brussels School of Economics and Management (ULB) ( email )

42 Avenue F. D. Roosevelt
1050
Brussels, 1050
Belgium
+32 2 6504466 (Phone)

HOME PAGE: http://www.solvay.edu/profile/marcobecht

European Corporate Governance Institute (ECGI) ( email )

Palace of the Academies
Rue Ducale 1 Hertogstraat
Brussels, 1000
Belgium

HOME PAGE: http://www.ecgi.global/users/marco-becht

Centre for Economic Policy Research (CEPR)

London
United Kingdom

Julian R. Franks

London Business School - Institute of Finance and Accounting ( email )

Institute of Finance and Accounting
Sussex Place - Regent's Park
London NW1 4SA
United Kingdom
+44 20 7262 5050 x3449 (Phone)
+44 20 7724 3317 (Fax)

Centre for Economic Policy Research (CEPR)

London
United Kingdom

European Corporate Governance Institute (ECGI)

c/o the Royal Academies of Belgium
Rue Ducale 1 Hertogsstraat
1000 Brussels
Belgium

HOME PAGE: https://ecgi.global/

Hideaki Miyajima

Waseda University - Graduate School of Commerce ( email )

1-6-1, Nishi-Waseda
Shinjuku-ku, Tokyo 169-8050
Japan
(81 3) 5286 2019 (Phone)
(81 3) 3203 7067 (Fax)

Research Institute of Economy, Trade and Industry (RIETI) ( email )

1-3-1 Kasumigaseki
Chiyoda-ku
Tokyo 100-8901
Japan

Kazunori (Icko) Suzuki (Contact Author)

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

6-1, Nishi-Waseda 1 chome,
Shinjuku-ku
TOKYO, TOKYO 169-8050
Japan
+81 3-5286-8411 (Phone)

HOME PAGE: http://www.waseda.jp/fcom/wbs/

European Corporate Governance Institute (ECGI) ( email )

c/o the Royal Academies of Belgium
Rue Ducale 1 Hertogsstraat
1000 Brussels
Belgium

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