In 1985, Demsetz & Lehn argued both that the optimal corporate ownership structure was firm-specific, and that market competition would drive firms toward that optimum. Because ownership was endogenous to expected performance, they cautioned, any regression of profitability on ownership patterns...

In a series of pathbreaking articles, Sylla argues that successful economies experience "financial revolutions" before they undergo their periods of rapid growth. In turn, governments generate these revolutions by putting public finance in order, and thereby giving private investors the...

The Japanese "main bank system" figures prominently in the recent literature on "relationship banking." By most accounts, the main bank epitomizes relationship finance: traditionally, every large Japanese firm had one, and that bank monitored the firm, participated in its governance, acted as...

According to modern contract theory, how firms structure their trading patterns and governance structures will depend both on the size of any relationship-specific investments they make, and on the feasibility of detailed contracts. Suppose contracts are hard to draft and enforce, but firm A...

Observers of the formerly communist transitional economies urge firms there to obtain funds from a relatively few sources. They note the institutional problems the firms face: courts not working, markets not developed, statutes not written. Because these firms cannot rely on the courts to...

Many Americans picture the Allied (i.e., U.S.) Occupation of Japan (1945-52) as the quintessentially good occupation: elaborately planned in advance, idealistically administered until derailed by anti-Communist indeologues in its later years, it laid the foundation for Japan's post-War democracy...

In the 1950s and 60s, Alexander Gerschenkron claimed that banks facilitate economic growth among "backward" countries. In 1990s and 2000s, many theorists similarly claim that banks promote growth. Banks do so by their superior monitoring and screening capabilities, they reason. Through those...

Central to so many accounts of post-war Japan, the keiretsu corporate groups have never had economic substance. Conceived by Marxists committed to locating "domination" by "monopoly capital," they found an early audience among western scholars searching for evidence of culture-specific group...

Prepared as an introductory chapter to a forthcoming book on the distribution sector in Japan, this essay introduces the basic structure of the industry. We note the way competition drives consumers, sellers, and manufacturers to select distributional arrangements that minimize total costs, and...

Economists and legal scholars routinely posit an implicit contract between Japanese firms and their principal lender (called their "main bank"). Under this arrangement, the bank implicitly agrees to rescue the firm (through financial and managerial help) when times turn bad. Out of court, it...