The Myth of the Main Bank: Japan and Comparative Corporate Governance

Miwa, Yoshiro; Ramseyer, J. Mark

doi:10.1111/j.1747-4469.2002.tb00809.x

Cited by 31 publications

(6 citation statements)

References 38 publications

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“…The claim is false, as we demonstrate inMiwa and Ramseyer (2002c, 2003c, 2003d. See alsoHayashi (2000);Hall and Weinstein (2000).14 Cable (1985, p. 119).…”

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confidence: 73%

Who Appoints Them, What Do they Do? Evidence on Outside Directors from Japan

Miwa

Ramseyer²

2002

SSRN Journal

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Although reformers often claim Japanese firms appoint inefficiently few outside directors, the logic of market competition suggests otherwise. Given the competitive product, service, and capital markets in Japan, the firms that survive should disproportionately be firms that tend to appoint boards approaching their firm-specifically optimal structure. The resulting debate thus suggests a test: if Japanese firms do maintain suboptimal numbers of outsiders, then those with more outsiders should outperform those with fewer; if market constraints instead drive them toward their firm-specific optimum, then firm characteristics may determine board structure, but firm performance should show no observable relation to that structure. To explore the issue, we assemble data on the 1,000 largest exchange-listed Japanese firms from 1986-94. We first ask which firms tend to appoint which outsiders to their boards, and find the appointments decidedly non-random. Firms appoint directors from the banking industry when they borrow heavily, when they have fewer mortgageable assets, or when they are themselves in the service and finance industry. They appoint retired government bureaucrats when they are in construction and sell a large fraction of their output to government agencies. And they appoint other retired business executives when they have a dominant parent corporation or when they are in the construction industry and sell heavily to the private sector. Coupling OLS regressions with two-stage estimates on a subset of the data, we then ask whether the firms with more outside directors outperform those with fewer. They do not. Obviously, one cannot draw solid conclusions from the absence of significant results. Yet the regressions do suggest-exactly as the logic of market competition predicts-that board composition is endogenous: firms choose boards appropriate to them. Given that the composition does not change from the thriving 1980s to the depressed 1990s, optimal board structure also seems not (at least by the observable indices) to depend on the macroeconomic environment.

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“…The claim is false, as we demonstrate inMiwa and Ramseyer (2002c, 2003c, 2003d. See alsoHayashi (2000);Hall and Weinstein (2000).14 Cable (1985, p. 119).…”

mentioning

confidence: 73%

Who Appoints Them, What Do they Do? Evidence on Outside Directors from Japan

Miwa

Ramseyer²

2002

SSRN Journal

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“…7 Aoki, Patrick & Sheard (1994: 5). See Miwa & Ramseyer (2002a, 2003c for evidence to the contrary. 8 (2001: 91).…”

Section: B the Theory Of Banks And Relationship Bankingmentioning

confidence: 99%

Does Relationship Banking Matter? Japanese Bank-Borrower Ties in Good Times and Bad

Miwa

Mark²

2003

SSRN Journal

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“…The environment for Japanese corporate governance has changed in a manner 7. In support of this claim, I rely in part on MGrR's scholarship on the role of corporate directors in Meiji Japan (Miwa and Ramseyer 2000). Although the focus of their analysis differs from my own, Okazaki and Okuno (1999) also stress that pre-war Japanese corporate governance was quite distinct from the system that emerged in the wartime and postwar periods.…”

Section: Japanese Corporate Governance We Hardly Knew Yementioning

confidence: 99%

On the (Fleeting) Existence of the Main Bank System and Other Japanese Economic Institutions

Milhaupt¹

2002

Law & Social Inquiry

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In the accompanying essay, Professors Miwa and Ramseyer (M&R) use economist Masahiko Aoki's book as a springboard to argue, creatively and provocatively, that most of the comparative corporate governance academy has been chasing a myth. The myth, which M&R attribute largely to Aoki's vast and influential scholarship, is the existence of the "main bank system" and the related institutions of lifetime employment and keiretsu groups that have figured prominently in academic and professional thinking about corporate Japan (Miwa and Ramseyer 2002). M&R will never be accused of pursuing a timid research agenda. They might have limited their ambitions to showing that Japanese economic institutions are ill defined or aggrandized in popular and professional usage, or that these institutions have ceased to function as they did in their heyday. But others have trodden this path.' Rather, at least as I read their essay, M&R seek to alter our basic understanding of postwar Japanese economic organization and behavior, by attempting to prove that the conventional wisdom is flatly untrue. The crux of their argument is summed up in the following passage: "The claims about the Japanese main bank system are. .. false.. .. Firms and workers did not bargain for lifetime employment. Banks neither promised to rescue defaulting debtors nor monitored debtors on behalf of their rivals. The keiretsu had no substance, and the government had Curtis J. Milhaupt is the Fuyo professor of law and director, Center for Japanese Legal Studies, Columbia Law School. Thanks to David Weinstein and Mark West for helpful comments on an earlier draft of the essay. 1. Scholars have long noted the ambiguity and classification problems inherent in the term keiretsu. Moreover, as discussed below, numerous critical evaluations of the main bank system have appeared in recent years.

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The Myth of the Main Bank: Japan and Comparative Corporate Governance

Cited by 31 publications

References 38 publications

Who Appoints Them, What Do they Do? Evidence on Outside Directors from Japan

Who Appoints Them, What Do they Do? Evidence on Outside Directors from Japan

Does Relationship Banking Matter? Japanese Bank-Borrower Ties in Good Times and Bad

On the (Fleeting) Existence of the Main Bank System and Other Japanese Economic Institutions

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