How is the Current View of Japanese Corporate Governance? : A Snapshot of the Present Corporate Governance Issues in Japan

This study examines the latest literature on Japanese corporate governance with a view to identify the nature of current view of the Japanese corporate governance and thereby recognizes major contemporary issues to be handled. More specifically this study attempts to address three main empirical questions. (i) How far has the recent reform of corporate governance progressed? (ii) What factors determine a company's reform effort? And (iii) Do reforms actually improve the level of corporate performance? The results show an increasing trend of shifting the Japanese corporations toward the market model. There is a remarkable priority on shareholders and customers maintaining the emphasis on employees. Both executive officer system and outside director systems are being introduced widely, ensuring proper segregation between 'execution' and 'monitoring' instead of traditional seniority based promotions within the corporation. The relationship between governance reforms and corporate performance is positively significant and corporate governance reforms are contributing to improve performance considerably. Adequate disclosure of information has a significant impact on corporate performance by increasing pressure on managers and helpful to trim down the agency problem. Nevertheless, there is no significant relationship between corporate performance and introduction of 'executive officer system' or 'outside director system'. Companies with high level of foreign shareholding and high dependence on capital markets are dynamically reforming their governance structures while companies with a high ratio of stable stockholders and more dependence on borrowing are inactive in reforming