As the Stewardship Code and Corporate Governance Code are executed, governance reform in Japan in principle will enter a new phase of improving effective enforcement under the newly established formal arrangement. In order to enhance the performance (earning capability) of Japanese firms further, the reforms should contribute to encouraging research and development (R&D), human capital investment, mergers and acquisitions (M&A), corporate restructuring, and selection of appropriate financial policies, which together form the base of corporate innovation. However, there is limited research examining the extent and the channels through which such changes in forms of governance have influenced corporate behavior. It is also unclear whether the reforms based on the U.S. model are indeed compatible with other economic institutions in Japan such as the long-term employment system, or whether those reforms would induce myopic behavior by firms through excessive external pressure. Considering such problems, this project will highlight the effect of changing forms of governance on various phases of corporate innovative activities including R&D, human investment, M&A, restructuring, and capital and organizational choice.
September 2, 2019 - August 31, 2021