Adoption and Policy Implications of Japan’s New Corporate Governance Practices after the Reform
37 Pages Posted: 19 Jul 2010 Last revised: 25 Jul 2010
Date Written: May 16, 2010
Abstract
In this paper we explain the process and policy implications of Japanese firms' adoption of recently reformed corporate governance practices. We use a selective adaptation framework in doing so.
We present some qualitative predictions about the possible outcome of their adoption process. One advantage of our approach is that we can describe various aspects of the evolutionary process of Japan’s corporate governance reform as a system in a consistent manner, rather than as independent pieces. Our predictions provide policy implications and are empirically testable.
Japan’s post-bubble corporate governance reform has been extensive and involves the enactment and revisions of many relevant laws and affected institutions. Japan’s aim has been to install U.S.-like practices (the de facto global standard), with these practices replacing the now tarnished bank-centered practices, and to facilitate Japanese industry in regaining global competitiveness. However, we show that Japanese businesses’ adoption of U.S. practices has been selective and efficiency and other policy implications of such behavior are potentially dysfunctional.
Keywords: corporate governance reform, Japan, selective adaptation, efficiency, keiretsu
JEL Classification: G30, L20, M10
Suggested Citation: Suggested Citation