Limits to Investment Fund Activity
This chapter examines the assumption that the behaviour of investment funds is inconsistent with the traditional focus by Japanese managers on employees’ interests as much as shareholders’ wealth. The 1990s saw significant changes in Japan’s financial markets, including an increase in foreign shareholders and the introduction of new financial products. In response, new legislation was introduced mainly aimed at revitalizing financial markets, by making it easier for firms to undertake reorganizations such as mergers, acquisitions, and other types of restructuring. There is little mention of employees in these new laws. PE, activist HFs, and SWFs have been less active in Japan than some other countries. Some statistical studies show that PE transactions have a negative effect on employment and a positive effect on shareholder returns. However, it is still difficult for management to make significant organizational change without the consent of employees. The number of hostile takeovers is still very low, providing an important context for fund activity.
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