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Corporate Governance in JapanInstitutional Change and Organizational Diversity$
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Masahiko Aoki, Gregory Jackson, and Hideaki Miyajima

Print publication date: 2007

Print ISBN-13: 9780199284511

Published to Oxford Scholarship Online: September 2007

DOI: 10.1093/acprof:oso/9780199284511.001.0001

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The Turnaround of 1997: Changes in Japanese Corporate Law and Governance

The Turnaround of 1997: Changes in Japanese Corporate Law and Governance

Chapter:
(p.310) 11 The Turnaround of 1997: Changes in Japanese Corporate Law and Governance
Source:
Corporate Governance in Japan
Author(s):

Zenichi Shishido

Publisher:
Oxford University Press
DOI:10.1093/acprof:oso/9780199284511.003.0011

This chapter examines the impact on the scope of behaviour of top management of legal reforms in Japan since 1997. Demand-pull measures were promoted by business associations to facilitate the introduction of new market-oriented business practices, including removing prohibitions of share buybacks, introducing stock options, and share swaps and spin-offs to support corporate reorganization through M&A. Policy-push reforms were also initiated by the government in order to push change in existing corporate governance practices, such as changes to accounting rules. The epoch making 2002 amendment to the Company Law introduced an American-style board of directors, termed ‘board with committees’ as a second option alongside the traditional Japanese-style board with statutory auditors. By facilitating these new practices, Japanese corporate law has undergone a formal convergence with the US model. However, the diversity of actual choices among firms is argued to reflect continued functional divergence due to differences in the incentive patterns among corporate stakeholders. Thus, legal reform holds an ambiguous potential.

Keywords:   Japanese economy, corporate law, board of directors, non-executive directors, independence, investor protection, shareholder rights

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