Does passive ownership affect corporate governance? Evidence from the Bank of Japan’s ETF purchasing program

Masumi Sai and Kazuo Yamada

Research in International Business and Finance, 2025, vol. 77, issue PB

Abstract: We show that passive ownership improves the corporate governance of listed companies utilizing the large-scale equity exchange-traded fund (ETF) purchase program by the Bank of Japan (BOJ). The program provides a cross-sectional variation in the ownership by passive ownership. The empirical findings reveal that firms with high passive ownership are more likely to dismantle anti-takeover defenses, introduce executive stock options, have a high ratio of outside directors and female board members, and have small boards. Furthermore, our empirical results show that passive ownership dismantles Japanese historical closed ownership structures. These results are robust using alternative definitions and under a variety of subsamples. These findings suggest that passive ownership contributes to improved corporate governance practices among listed companies.

Keywords: Passive investment; ETFs; Bank of Japan (search for similar items in EconPapers)
Date: 2025
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Persistent link: https://EconPapers.repec.org/RePEc:eee:riibaf:v:77:y:2025:i:pb:s0275531925001801

DOI: 10.1016/j.ribaf.2025.102924

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