Managerial Incentive Mechanisms and Turnover of Company Presidents and Directors in Japan

The role of directors in Japanese companies is unique in a number of ways. One such characteristic is the dual nature of their role, which encompasses both monitoring and managing responsibilities. This paper considers their role in management. Empirical analysis with detailed data for each director studied reveals that directors take responsibility for performance, and that executive turnover is one of the main managerial incentive mechanisms. Abnormal turnover of a president does not cause further resignation among directors. Outside directors decrease the turnoverperformance sensitivity of presidents, suggesting their different role in corporate governance in Japan from that in the United States.Corprrate Governance, Board of Directors, Turnover, Incentive Mechanism

The Multi-Sector Business Cycle Model and Aggregate Shocks: An Empirical Analysis

This paper discusses the applicability of a multi-sector business cycle model to the Japanese economy. Through dynamic factor analysis, output fluctuations are decomposed into aggregate and sectoral shocks. It is shown that independent sectoral shocks are more significant than common shocks, which conclusion is consistent with the model proposed by Long and Plosser (1983). In addition, the paper reveals that the importance of aggregate shocks increased during the so-called "bubble" period of the late 1980's.Dynamic factor analysis, Aggregate shocks, Business-cycle models

Cross-Shareholdings, Outside Directors, and Managerial Turnover: The Case of Japan

We have analyzed the monitoring role of outside directors in Japan. A detailed classification of each outside director into (1)former bankers; (2)former shareholders; (3)former cross-shareholders; and(4)pure outside directors reveals that only pure outside directors increase the turnover-performance sensitivity of inside directors. That is, we found that the background of each outside director is crucial for his or her role as a monitor.

Employment Policy and Corporate Governance: An Empirical Comparison of the Stakeholder versus the Profit-Maximization model

Japan's economic problems over the past decade and a half have triggered far reaching changes in the country's corporate governance system and there have been significant changes in both companies' ownership structures and composition of board members. This paper examines how board and ownership structures affect firms' decision as to how to reduce labor costs when firms face excess employment. Our findings confirm that outside directors are more inclined to implement layoffs and voluntary or early retirement, while insiders are more likely to decrease new hiring and protect incumbent employees. These findings are consistent with the stakeholder view of the firm rather than the neoclassical view of firms as profit-maximizers.corporate governance, employment downsizing, multivariate probit model

Organizational Culture and Corporate Governance in Russia : A Study of Managerial Turnover

In this paper, we investigate the possible impacts of ownership structure and corporate performance on managerial turnover using a unique dataset of Russian corporations. We argue that Russia is regarded as a country with a highly authoritarian and collectivism-oriented national culture and this peculiarity is the key to disentangling the puzzle of the statistically weaker relationship between firm performance and CEO renewal in Russian firms. Standing on this viewpoint, we deal with not only CEO dismissal, but also managerial turnover within a company as a whole. By conducting multinomial analysis that incorporates both factors, we found significant relationship between firm performance and CEO dismissal, while, consistent with most previous studies, a standard logit analysis of CEO turnover revealed no clear relationships. We also found that the presence of a dominant shareholder significantly increases the likelihood of turnover of whole management team, while foreign ownership tends to cause partial (CEO only) turnover. Our empirical result is consistent with the "cultural view" of management practice as put forward by House et al. (2004).organizational culture, corporate governance, managerial turnover, Russia

Voluntary Information Disclosure and Corporate Governance: The Empirical Evidence on Earnings Forecasts

This study investigates the determinants of companies' voluntary information disclosure. Employing a large and unique dataset on the companies' own earnings forecasts and their frequencies, we conducted an empirical analysis of the effects of a firm's ownership, board, and capital structures on information disclosure. Our finding is consistent with the hypothesis that the custom of cross-holding among companies strengthens entrenchment by managers. We also find that bank directors force managers to disclose information more frequently. In addition, our results show the borrowing ratio is positively associated with information frequency, suggesting that the manager is likely to reveal more when his or her firm borrows money from financial institutions. However, additional borrowings beyond the minimum level of effective borrowings decrease the management's disclosing incentive.Voluntary information Disclosure, Corporate Governance, management earnings forecast

Voluntary Information Disclosure and Corporate Governance : The Empirical Evidence on Earnings Forecasts

This study investigates the determinants of companies' voluntary information disclosure. Employing a large and unique dataset on the companies' own earnings forecasts and their frequencies, we conducted an empirical analysis of the effects of a firm's ownership, board, and capital structures on information disclosure. Our findings are consistent with the hypothesis that the custom of cross-holding among companies strengthens entrenchment by managers. We also find that bank directors force managers to disclose information more frequently. In addition, our results show the borrowing ratio is positively associated with information frequency, suggesting that the manager is likely to reveal more when his or her firm borrows money from financial institutions. However, additional borrowings beyond the minimum level of effective borrowings decrease the management's disclosing incentive.Information disclosure, Earnings forecast, Capital structure, Japan

Executive Pay in Japan: The Role of Bank-Appointed Monitors and the Main Bank Relationship

The tournament model has the feature that executive compensation depends on the wages paid to workers at lower levels of the corporate hierarchy. The agency model shows that compensation based on firm performance is a means by which incentives can be provided to executives once a promotion tournament has been resolved. In this paper, we combine aspects of both models and show that the existence of an outsider who monitors the firm's activities will lower the sensitivity of pay to firm performance for top executives and reduce the importance of tournament-based incentives. Using panel data for 56 Japanese electronics firms, we find support for the notion that bank-appointed Board members help monitor top executives and that tournament considerations are a particularly important feature of executive compensation in Japan.Executive pay, tournaments, agency, monitoring, main bank relationship

The Internal Control System of Russian Corporations

corporate form, organizational behavior, institutional complementarity, stock ownership, corporate governance, separation of ownership and management, ownership structure, corporate performance, managerial turnover, Russia

Saving, Capital Flows, and the Symmetric: International Spillover of Industrial Policies

This paper considers the effects of industrial policies in dynamic economy with international trade and monopolistic competitions. Special attention is paid to saving, international capital flow, and welfare of all the trading economies. The effects of industrial policies in one country spill over to its trading partners through changes in terms of trade and productivity. Considering such effects, the paper shows that industrial policies in one country increase consumption and saving of all the trading countries. The effects on welfare of foreign countries are identical to those of domestic economy. If the movement of capital among countries is perfect, the movements of consumption over time of all countries also become identical.