Alternative Corporate Governance Systems in Japanese Firms: Implications for a Shift to Stockholder-Centered Corporate Governance

In Asia, the recent catastrophic decline in regional stock markets, continuing currency crisis and failures of major financial institutions and industrial corporations have increased domestic and international interest in corporate governance. Nowhere is this greater than in Japan where financial institution reform has catapulted this to the fore. In this paper, we use agency theory and institutional theory, together with comparative case examples, to derive some propositions on the dynamics of changing corporate governance systems in Japanese firms. We argue for the co-existence of stakeholder and shareholder-centered corporate governance systems in Japan. This argument has an important implication for corporate governance research and agency theory. Namely, changes in ownership structure and institutional expectations would force firms to focus on maximizing shareholder value even where the interests of stakeholders are more emphasized. It suggests an environmental selection mechanism to ensure the emergence of appropriate corporate governance mechanisms to solve the agency problem. Further, the loss of competitiveness and the prolonged poor performance of firms can change the institutional norms to emphasize asset efficiency and transparency rather than stability and business ties.     

Corporate Headquarters Relocation: Evidence from the Capital Markets

This paper assesses the stock market reaction to announcements of corporate headquarters relocations and examines financial and geographical factors related to wealth effects and factors that influence the decision to relocate corporate headquarters. The results indicate that announcements of relocations are associated with significant positive stock price effects. On average, the stock price of relocating firms increases by 1.29% during the two-day period around the announcement. Abnormal returns are positively related to the availability of labor and negatively related to the cost of living in the new location and the change in employment levels. A logit analysis indicates that the probability of a firm relocating is partially determined by the firm size and the rental expenses/sales ratio. The results also indicate that firm size, the employment/asset ratio levels, and listing in the NYSE/AMEX affect the decision to relocate to a Fortune-ranked city. Finally, firms relocating to Fortune -ranked cities are characterized by a high level of insider ownership relative to firms moving to non-ranked cities.     

A comparative analysis of layoff announcements and stock price reactions in the United States and Japan

Downsizing and layoffs are an important mechanism for U.S. firms to cope with their strategic and economic environment. In contrast, the Japanese tradition of lifetime employment limits the ability of firms to employ layoffs as a strategic measure, relegating its use to conditions of financial distress. This paper provides the first comparison of layoffs in Japan and the United States and examines stock price reactions to layoff announcements in each country from 1990 to 1994. Agency theory and Aoki's cooperative game theory are employed to discuss differences in the governance structures of U.S. and Japanese firms and their implication for stock price reactions. Results show that layoff announcements trigger negative returns for both U.S. and Japanese firms. Specifically, layoff announcements of U.S. firms are associated with a negative 1.78 percent abnormal return, while layoff announcements for Japanese firms are associated with a negative 0.56 percent abnormal return. To better understand the impact of layoffs, this study examines the relationships between stock price reactions and various layoff characteristics (such as whether the layoff is proactive or reactive or whether the layoff is the first in the industry). Implications of the findings are discussed. © 1997 John Wiley & Sons, Ltd.     

Leveraging foreign institutional logic in the adoption of stock option pay among Japanese firms

Research summary : We investigate why Japanese firms have adopted executive stock option pay, which was developed with shareholder‐oriented institutional logic that was inconsistent with Japanese stakeholder‐oriented institutional logic. We argue that Japanese managers have self‐serving incentives to leverage stock ownership of foreign investors and their associated institutional logic to legitimize the adoption of stock option pay. Our empirical analyses with a large sample of Japanese firms between 1997 and 2007 show that when managers have elite education, high pay inequality with ordinary employees, and when firms experience poor sales growth, foreign ownership is more likely associated with the adoption of stock option pay. The study shows the active role of managers in facilitating the diffusion of a new governance practice embodying new institutional logic. Managerial summary : Why have Japanese firms adopted stock option pay for executives? Inconsistent with Japanese stakeholder‐oriented tradition in corporate governance, such pay has been believed to prioritize managerial attention to the interests of shareholders over those of other stakeholders. However, to the extent that shareholders' interests are legitimate in the Japanese context, executives who have self‐serving incentives to adopt such pay can leverage the need to look after shareholders' interest in their firms to legitimize their decisions. In a large sample of Japanese firms, we find that foreign ownership (representing shareholders' interests) is more likely to be associated with the adoption of stock option pay when managers are motivated to receive such pay, such as when they have elite education, high pay inequality with ordinary employees, or poor sales growth. Copyright © 2015 John Wiley & Sons, Ltd.     

治理伦理与公司治理:二维治理结构的建立

流行的公司治理理论是以制度性机制为单一维度的分析框架。本文通过对公司治理行为所暗含的“私人安排”的分析,将伦理参数导入公司治理的机制体系,建立了一个扩展成的“二维治理结构”。通过对几种典型的治理结构的比较分析,指出“治理伦理”标准化和职能化,以及提高伦理治理强度是改善公司治理绩效的关键环节之一。     

Corporate Social Responsibility and Governance: The Role of Executive Compensation

This article examines the relationship between corporate governance and corporate sustainability by focusing on an essential component of companies' governance structure: executive compensation programs. We propose an original empirical strategy based on a large set of the biggest capitalizations in Organization for Economic Cooperation and Development (OECD) countries over the period 2004–2018, with explicit measures of how companies integrate into executive managers' remuneration precise criteria of corporate social responsibility, an incentive scheme called corporate social responsibility (CSR) contracting. Our results show that proposing executive compensation programs including CSR criteria has a negative impact on financial performance, and a large positive impact on extra-financial performance based on the following dimensions: relationship with customers and suppliers, and community involvement. Second, we explore the moderating role of the corporate governance model by distinguishing the impact between firms with a shareholder or stakeholder corporate governance model and reveal significant differences in the impact of CSR contracting. For firms with a stakeholder corporate governance model, CSR contracting is no longer associated with a fall of financial performance and has a large positive impact on human resources, environmental, and human rights performance. On the other hand, CSR contracting has a negative impact on financial performance but no impact on extra-financial performance for firms with a shareholder corporate governance model.     

环境约束与家族企业上市时机选择

家族企业上市问题成为最近几年学术界和实业界人士共同关心的热点问题.本文认为,考虑到中国目前的制度环境约束,家族企业争取上市资格可能并非明智之举.其原因在于：一个有效率的治理结构安排是外部社会制度环境的函数,治理结构的有效性更多地体现在对外部环境的适应性方面,治理结构的变迁应该有相应的制度环境相配套,否则,家族企业进行强制性的制度变迁可能会带来企业总剩余的损失.本文还依据相关研究文献,提出了测量家族企业上市时机选择的社会环境阈值.     

Corporate sexual equality and firm performance

Research summary: Previous studies have mixed findings on the relation between corporate socially responsible policies and firm performance. This paper focuses on a specific type of corporate social responsibility—corporate sexual equality, measuring how a firm treats its lesbian, gay, bisexual, and transgender (LGBT) employees, consumers, and investors—and examines whether and how it relates to firm performance. Using a longitudinal dataset of public firms in the U.S. during the period of 2002–2006, we demonstrate that firms with a higher degree of corporate sexual equality have higher stock returns and higher market valuation. We also identify one of the mediating channels, the labor market channel, that brings higher productivity to firms that embrace sexual equality. Managerial summary: Corporate sexual equality measures how a company treats its lesbian, gay, bisexual, and transgender (LGBT) employees, consumers, and investors. It is an important dimension of corporate social responsibility policies and diversity management. Using a longitudinal dataset of public firms in the U.S. during the period of 2002–2006, we demonstrate that firms with a higher degree of corporate sexual equality have higher stock returns, higher market valuation, and higher labor productivity. Our findings suggest that discriminatory hiring behaviors based on sexual orientation hurt employers and shareholders financially and that implementing corporate sexual equality policies can enhance firms' financial performance, generating competitive advantages in labor markets and mutual benefits between employers and employees. Copyright © 2016 John Wiley & Sons, Ltd.     

Corporate Governance and Performance: The REIT Effect

Real estate investment trusts (REITs) offer a natural experiment in corporate governance due to the fact that they leave little free cash flow for management, which reduces agency problems. We exploit a unique and leading corporate governance database to test whether corporate governance matters for the performance of U.S. REITs. We document for a sample including governance ratings of more than 220 REITs that firm value is significantly related to firm-level governance for REITs with low payout ratios only. Repeating the analysis with the complete database that includes more than 5,000 companies and a control sample of firms with high corporate real estate ratios, we find a strong and significantly positive relation between our governance index and several performance variables, indicating that the partial lack of a relation between governance and performance in the real estate sector might be explained by a REIT effect.     

人力资本专用化的内生公司治理研究

人力资本专用化已日渐成为诸多公司成长与竞争中的一种战略选择，但人力资本专用化在改变公司财富创造的源泉并具有创新意义上的环境动态适应性时，亦会内生出诸如公司主雇双方的“讨价还价”、公司权利分配结构的边际调整、公司治理边界的重新定义以及公司潜在创新需求的治理保障等诸多不同层面的公司治理问题。在人力资本专用化的条件之下，人力资本专用化投资的公司激励机制、基于人力资本专用化的公司财富增长机制以及公司治理理论逻辑与治理结构的相应变革与完善均系公司治理的重要组成部分。     

Finance,Corporate Governance,and the Employment Relationship

This comparative paper examines the relationship between equity markets and corporate governance on one hand, and job tenure, training, and pay on the other. Two dimensions of equity markets and corporate governance are used: share trading activity and mergers and acquisitions. There is support for the posited links between these measures and job tenure, employee stock ownership plans, pay dispersion, and collective bargaining arrangements. Evidence on the relationship with training is more mixed.     

Corporate Governance and returns on information technology investment: evidence from an emerging market

Prior studies have reported mixed findings on the impact of corporate information technology (IT) investment on firm performance. This study investigates the effect of corporate governance, an important management control mechanism, on the relation between IT investment and firm performance in the Taiwanese electronics industry. Specifically, we explore board independence and foreign ownership, which have increasingly become salient factors concerning corporate governance in emerging markets. We address their roles across firms of different sizes and in industries where degrees of competitiveness run a wide gamut. Our results show a positive moderating effect of board independence on the IT investment‐firm performance relation, especially when competition intensifies. Furthermore, we find that the greater the foreign ownership in small firms, the more positive the IT investment‐firm performance relation, suggesting that foreign investors may bring IT expertise to help small firms reap the benefits of using IT. Copyright © 2010 John Wiley & Sons, Ltd.     

Human Resource Management in the Japanese Financial Institution Abroad: The Case of the London Office

The evidence on human resource management in overseas offices of Japanese multinational service-sector firms is far less abundant than that for manufacturing firms. Existing studies describe employment practices that vary, both between firms and over time. To supplement the existing body of evidence, the present study investigates employment practices at two Japanese financial services firms in the City of London through the use of interviews and questionnaire surveys. It focuses on those facets of the ‘Japanese’ management system that may be considered fundamental characteristics: recruitment and selection procedures, training methods, pay and promotion policies, employment security, company culture, and the position of workers within the overall organization. The study considers the implications of changes over time within the two firms when viewed in the context of the existing evidence; such comparison suggests that both corporate strategy and human resource management policy in Japanese financial organizations may have changed during the 1980s.     

The Layering of Meso‐Level Institutional Effects on Employment Systems in Japan

Japan's corporate governance and employment relations systems have been under considerable pressures to reform towards a more Anglo‐American model, against a back‐drop of intensified global competition and slow economic growth over two ‘lost’ decades. But what is the relationship between these systems, and specifically, how does corporate governance structure condition employment relations practice? This paper adopts the ‘Systems, Society, Dominance and Corporate (SSDC) effects’ framework in order to contextualize and evaluate the outcomes of these pressures, particularly in the period following the 2007–2008 global financial crisis. It reports case study data from various parts of the Japanese economy drawn from a series of firm‐based interviews and a variety of secondary sources. It is argued that there has been a strong degree of continuity in certain employment practices, such as lifetime employment, even in relatively new high technology firms, but that the pattern for other practices, such as seniority‐based pay, is more mixed with increasing differentiation between industries and individual organizations. We articulate a layered assessment of the varying SSDC effects at play in corporate Japan. This differentiation across industries and organizations is a function both of strategic choice (corporate effects) and also the increasing variation in the meso‐level institutional pressures that are experienced at organizational level; that is, the differentiation in the sources and nature of dominance effects that are relevant.     

Antecedents and consequences of corporate governance reform: the case of Germany

The paper examines the antecedents and consequences of the voluntary adoption of corporate governance reform in firms embedded in a relationship‐based governance system with less protection of minority shareholders. In such locations, ownership structure should be a key determinant of governance reform. Firms with dispersed ownership are likely to face agency problems but may lack sufficient ownership power in the hand of external owners for adoption to occur. Extensive ownership by external parties facilitates adoption but decreases the need and motivation to adopt governance reform. We examined the adoption of stock‐based incentive plans and transparent accounting regulations (e.g., greater disclosure to shareholders) among large German firms (DAX 100) during the late 1990s. We found an inverse ‘U’‐shaped relationship between ownership concentration and governance reform. In addition, we found that firms adopting governance reform were more likely to engage in corporate divestitures and achieve higher levels of market performance than firms not adopting governance reform. Copyright © 2003 John Wiley & Sons, Ltd.     

The Effect of Corporate Governance on Investment: Evidence from Real Estate Investment Trusts

This study investigates the relation between firms' investment choices and various governance mechanisms, using a sample of real estate investment trusts (REITs). We find evidence that the responsiveness of REITs' investment expenditures to their opportunities depends on their corporate governance structures. Within the set of governance mechanisms that we examine, we find particularly strong links between investment behavior and ownership. Specifically, we find that the investment choices of REITs are more closely tied to Tobin's q if they have greater institutional ownership or if they have lower director and officer stock ownership. These results are consistent with institutional owners monitoring the firm's investment policies as well as with high insider ownership allowing managers to follow their own investment agendas.     

Sorting things out: valuation of new firms in uncertain markets

New business models combined with a lack of objective operating data result in significant information asymmetry and uncertainty in the valuation of new firms in emerging markets. Information asymmetry increases the risks of both adverse selection and moral hazard. When traditional differentiators of firm quality are lacking, such as in emerging economic sectors, markets may turn to secondary information sources to filter and sort firms. We investigate the roles played by observable corporate governance characteristics as indirect indicators of new firms' potential qualitative differences. Markets may sort firms based on such characteristics because they are perceived to be correlated with desired but unobservable characteristics and actions and they lower the risks of both adverse selection and moral hazard. Our study of publicly traded U.S. Internet firms found that firm market valuation was strongly associated with corporate governance characteristics (e.g., executive and director stock‐based incentives, institutional and blockholder stock ownership, board structure, and venture capital participation). In addition, firm age moderated how markets used some quality proxies to determine firm valuation during the post‐IPO period. Copyright © 2003 John Wiley & Sons, Ltd.     

公司治理评价、治理指数与公司业绩--来自2003年中国上市公司的证据

本文基于2003年的评价样本，从中国上市公司治理指数（CCGI^NK）及其所涉及的六个维度进行实证研究发现：上市公司治理指数对总资产收益率、每股净资产、加权每股收益、每股经营性现金流量、总资产周转率、总资产年度增长率、财务预警值均有显著的正面影响．这表明拥有良好的公司治理机制有助于提升企业的盈利能力、股本扩张能力、运营效率、成长能力，有助于增强财务弹性和财务安全性。公司治理中所涉及的控股股东治理、董事会治理、经理层治理、信息披露、利益相关者治理、监事会治理机制，在很大程度上决定了上市公司是否能够拥有一套科学的决策制定机制与决策执行机制。而这将对公司业绩和公司价值产生直接而深远的影响。     

Corporate Governance and Firm Capabilities: A Comparison of Managerial, Alliance, and Personal Capitalisms

Incentive structures embodied in different systems of corporate governance produce firms with inclinations towards the development of particular capabilities and strategic assets and disinclinations towards the development of others. To the extent that there is an excessive dependence upon any particular type of governance, an economy as a whole will be endowed with both its benefits and costs. As such, governance reform in East Asian economies may be better aimed at cultivating alternative governance institutions alongside existing relational institutions, rather than in converting these governance systems into facsimiles of the so-called Anglo-American model.     

Corporate social performance,analyst stock recommendations,and firm future returns

This study posits that security analysts heed corporate social performance information and factor it into their recommendations to general investors. In particular, as corporate social performance is often uncertain and ambiguous to general investors, analysts may serve as the informational pathway connecting corporate social performance to firm stock returns. Thus, we argue that analyst recommendations mediate the relationship between corporate social performance and firm stock returns. On the basis of not only a qualitative study with literature searches and interviews of stock analysts but also a quantitative study with two longitudinal samples of large firms, we find support for these arguments. Our findings uncover an information‐based underlying mechanism for the link between corporate social performance and financial performance. Copyright © 2013 John Wiley & Sons, Ltd.