This project aims at examining new corporate governance arrangements that could encourage the further growth of Japanese firms. We focus on the managerial autonomy (discretion) that supports risk taking and active innovation. We focus not only on normal agency problems between investors and managers, but also on the problem of governance of the holding companies (headquarters of multi-division firms) over their subsidiaries (business units). Further, we continue to consider the diversified corporate governance arrangement in Japanese firms that has been emphasized through our previous works. The comparative approach with the United States, the United Kingdom as well as continental European and Asian business groups is also introduced into the analysis. In designing the new governance arrangement, we consider the right balance between the shareholders' and other stakeholders' interest. From these aspects, we address 1) the corporate restructuring process including the initiatives of the main bank, private equity firms, and mergers and acquisitions (M&As), 2) the financial system and governance arrangement that enable firms to take high risks, 3) the adequate ownership and board structure that uphold the right balance between shareholders and other stakeholders, and 4) the two-tiered governance structure among the business groups and the functions of their internal capital markets.
April 1, 2013 - March 31, 2015