Market liquidity and bank-dominated corporate governance: Evidence from Japan

2020

Sustainability

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This study aimed to reveal the role of institutional investors with shareholder-oriented scopes in a stakeholder-oriented economy such as Japan. With financial globalization, the increasing number of institutional shareholders in Japanese corporations enables us to investigate whether their shareholder-oriented perspectives are conducive to taking on effective monitoring roles under stakeholder-oriented corporate governance. This study’s sample included large listed firms of the TOPIX 500 in Japan during 2010-2016. Using 2924 firm-year observations, the effect of institutional investors on firm performance was analyzed to test the role of institutional investors in stakeholder-oriented corporate governance. Our study showed that the monitoring role of institutional shareholders, or foreign shareholders, functions effectively in Japanese corporations. In addition, we showed that the monitoring roles of these are expected to strengthen firms through higher growth opportunities. These results implied that institutional shareholders contribute to enhancing sustainable firm performance and constructing sustainable corporate governance mechanisms in a stakeholder-oriented system.

Section: Ownership Monitoringmentioning

confidence: 99%

Section: Introductionmentioning

confidence: 99%

Institutional Ownership and Firm Performance under Stakeholder-Oriented Corporate Governance

2020

Sustainability

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“…This asymmetric payoff is problematic when borrowers face distress. Main banks are not only the largest lenders for client firms, but are also lenders for the large equity owners of the firms (Morck et al, 2000;Sakawa and Watanabel, 2014). Main banks may have the chance of acquiring additional payments, such as dividends, when projects of borrowing firms produce higher earnings.…”

Section: Japanese Corporate Governance and Main Bank Systemmentioning

confidence: 99%

Main bank relationship and accounting conservatism: evidence from Japan

2019

Asian Bus Manage

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In a market-oriented economy like the U.S., the process of monitoring through lending mitigates lenders' demand for accounting conservatism. Japanese corporate governance is characterized as a bank-dominated or relationship-oriented system. Under bank-dominated systems, main banks are expected to be effective monitors. In our model, main banks play the role of reducing the lenders' demand for accounting conservatism by reducing information asymmetry. We find that main banks can reduce the demand for accounting conservatism.Our findings help understand accounting conservatism vis-à-vis agency problems. We provide empirical evidence to contribute to literature on banking, specifically to fields such as relationship banking.

“…From shareholder-oriented corporate governance regimes, foreign shareholders tend to have shareholder-oriented logics under stakeholder-oriented corporate governance (Desender et al, 2016). In fact, foreign shareholders would exert disclosure pressure on managers, which decreases information asymmetry in Japanese corporations (Sakawa et al, 2014). In Asian Pacific countries, the quality of IFRS mitigates the level of earnings management (Wijayana & Gray, 2019).…”

Section: Hypothesis Developmentmentioning

confidence: 99%

The Internationalization and Voluntary Adoption of International Accounting Standards by Japanese MNEs

2021

Manag Int Rev

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This study investigates the relationship between the degree of a company's internationalization and the voluntary adoption of International Financial Reporting Standards (IFRS) and US Generally Accepted Accounting Practices (GAAP) based on an analysis of Japanese multinational enterprises (MNEs). Our research is based on a unique setting, namely, the co-existence of voluntary IFRS and US GAAP, which began in Japanese corporations after March 2010. We find as follows. First, voluntary IFRS and US GAAP adoption is higher in Japanese MNEs with a higher internationalization degree. Second, greater foreign shareholding of Japanese MNEs would result in voluntary US GAAP adoption rather than that of IFRS. This result implies that foreign shareholders prefer US GAAP adoption over IFRS adoption or Japanese GAAP. Under a semi-globalization perspective, Japanese MNEs tend to have a US region-specific approach. This finding is interpreted as follows: foreign shareholders with shareholder-oriented logics stress the compatibility of financial reporting of MNEs with a US region-specific approach. Our study also provides new insight into international accounting standards of MNEs under stakeholder-oriented corporate governance. Corporate governance deviation, such as US GAAP adoption, is caused by greater presence of foreign shareholders with shareholder-oriented logics.