The Unwinding of Cross‐Shareholding in Japan: Causes, Effects, and Implications

Miyajima, Hideaki; Kuroki, Fumiaki

doi:10.1093/acprof:oso/9780199284511.003.0003

Cited by 74 publications

(8 citation statements)

References 20 publications

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“…However, compared with Morck et al ( 2000 ), the mean shareholding ratio of banks in our database is lower. As Miyajima and Kuroki ( 2007 ) argued, the shareholding ratio of banks decreased during the 2000s because of the burden of nonperforming loans and asset restructuring of banks. Table 10 is consistent with the results of Miyajima and Kuroki ( 2007 ).…”

Section: Estimation Resultsmentioning

confidence: 99%

“…As Miyajima and Kuroki ( 2007 ) argued, the shareholding ratio of banks decreased during the 2000s because of the burden of nonperforming loans and asset restructuring of banks. Table 10 is consistent with the results of Miyajima and Kuroki ( 2007 ). The 25th percentile of shareholding ratios is zero, suggesting that some banks do not hold shares of borrowing firms, even if the lending share is the largest or second largest.…”

Section: Estimation Resultsmentioning

confidence: 99%

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Lending relationships and a corporate liquidity shortage: Evidence from the COVID‐19 shock in Japan

Tsuruta

2022

Manage Decis Econ

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We investigate the effects of lending relationships between banks and borrowers on loan supply during the economic shock caused by the coronavirus (COVID‐19) pandemic. Using bank–firm matched data for Japan to control for several firm‐ and bank‐specific unobserved effects, we show that banks with close relationships with borrowing firms offer more bank loans to these firms during the COVID‐19 shock. This effect is larger if the borrowing firms' cash flows decrease substantially during the shock. These results imply that banks acted as liquidity providers for borrowers during sudden and unpredictable shocks if their relationships with firms were close.

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Section: Estimation Resultsmentioning

confidence: 99%

Section: Estimation Resultsmentioning

confidence: 99%

Lending relationships and a corporate liquidity shortage: Evidence from the COVID‐19 shock in Japan

Tsuruta

2022

Manage Decis Econ

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“…Our corporate governance measures are as follows. Cross-shareholding (that is, “intercorporate shareholding between banks and corporations, and among corporations”: Miyajima & Kuroki, 2007 : 79) was a key characteristic of Japan’s unique ownership structure starting in the 1960s until the mid-1990s when it began to recede (opt. cit.).…”

Section: Methodsmentioning

confidence: 99%

Shareholder reaction to corporate philanthropy after a natural disaster: an empirical exploration of the “signaling financial prospects” explanation

2023

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Corporate response to natural disaster in the forms of cash and/or in-kind donations (corporate philanthropic disaster response, or CPDR) is a growing form of corporate philanthropy. Through an event study methodology based on 1,775 firms listed on the Tokyo Stock Exchange, we analyze shareholder reaction to CPDR announcements after the 2016 Kumamoto earthquakes in Japan. Controlling for the possibility that the most common explanations (buying goodwill and corporate governance) are at play, our results provide an empirical test of a little-explored explanation for the positive shareholder reaction to CPDR: namely, that corporate philanthropy is a market signal to outside investors of the firm's future financial prospects. We find this explanation to be significant. Of note are also the facts that shareholder reaction is only significantly positive in the case of cash donation (as opposed to in-kind), and is more positive when announced early. Overall, our results align with the "strategic philanthropy" view grounded in resource-dependence theory. But instead of the typical focus on non-financial stakeholders, we argue that philanthropic donations can be used to directly influence investors.

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“…Because of cross-shareholding in Japanese companies, in which large portions of firms’ equities are controlled and illiquid, the threat of a takeover, which is a critical tool of discipline used by managers in America, does not apply (Phan and Yoshikawa, 2000, p. 5). However, cross-shareholdings declined significantly during the banking crises, as a result of declining bank share prices and the Banks’ Shareholding Restriction Law in 2001 (Miyajima and Kuroki, 2007). Many of the listed companies in Japan have reduced cross-shareholdings about 20% since 2014 – especially traditional Japanese conglomerates such as Mitsubishi and Mitsui (Nihon Keizai Shinbun, 2021a).…”

Section: Theoretical Background and Literature Reviewmentioning

confidence: 99%

Revisiting Japan’s stakeholder-based system and foreign ownership: IR managers’ view of foreign shareholders in corporate governance reform in Japanese companies

Nemoto

2022

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Purpose Building on the institutional theory perspective on corporate governance change and based on interviews with investor relations (IR) managers in large Japanese companies, this study aims to examine Japanese IR managers’ perceptions of the influence of foreign shareholders on Japan’s corporate governance reform and stakeholder-based system. The paper examines tensions, conflicts and collaborations among different stakeholders involved in corporate governance changes in Japan, especially in the areas of firm ownership, employment relations and boards of directors. The paper explains why convergence does not happen in some large Japanese companies by investigating Japanese managers’ responses to and perceptions of foreign shareholders in multiple corporate contexts. Design/methodology/approach The author conducted in-depth interviews with ten IR managers at large, listed Japanese companies in Kyoto and Tokyo and two managers at foreign investment banks in Tokyo, between 2018 and 2021. Findings This paper explores five themes that emerged from my interviews: Chief executive officers’ (CEOs’) mixed perceptions of foreign investors, the effectiveness of CEO compensation and outside directors, managers’ reluctance to accept stock price-driven business strategies, foreign investors’ engagement vs investments in index funds and gender patterns, including the effectiveness of token female outside directors. The Japanese companies the author looked at incorporated foreign shareholders as consultants and adopted a few major shareholder-based customs, such as CEOs communicating with investors, having outside directors, increasing CEO compensation and slimming down unprofitable parts of the business via restructuring and downsizing. Simultaneously, they resisted a few major shareholder-based practices. Foreign shareholders’ pressure revealed tensions and contradictions between the Japanese stakeholder system and shareholder primacy-based customs. Originality/value This paper is one of the few qualitative studies that explores Japanese IR managers’ responses to and perceptions of foreign shareholders in corporate governance reform, with a particular focus on ownership, employment relations and board members. This paper provides examples of tension, conflict and cooperation between Japanese managers and foreign investors, as seen through the eyes of Japanese IR managers. Examining changes in Japan’s stakeholder-based system of corporate governance reform enables us to better understand the processes by which, with vigorous pressure from government and foreign shareholders, a non-western country like Japan may adopt shareholder-based customs and how such a change may also lead to institutional changes.

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The Unwinding of Cross‐Shareholding in Japan: Causes, Effects, and Implications

Cited by 74 publications

References 20 publications

Lending relationships and a corporate liquidity shortage: Evidence from the COVID‐19 shock in Japan

Lending relationships and a corporate liquidity shortage: Evidence from the COVID‐19 shock in Japan

Shareholder reaction to corporate philanthropy after a natural disaster: an empirical exploration of the “signaling financial prospects” explanation

Revisiting Japan’s stakeholder-based system and foreign ownership: IR managers’ view of foreign shareholders in corporate governance reform in Japanese companies

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