 Ownership Structure and Corporate Governance: Has an Increase in Institutional Investors f Ownership Improved Business Performance?Hideaki Miyajima and
Takaaki Hoda
Public Policy Review, 2015, vol. 11, issue 3, 361-394 Abstract: A dramatic increase in shareholder ownership by domestic and foreign institutional investors, along with the decline of the main bank system, is one of the greatest changes in the governance structure of Japanese companies in recent years. This paper aims to identify the effects of the rapid change in the shareholder ownership structure on corporate governance in Japan.Based on a comprehesive database concerning major shareholders in fiscal 1990- 2008 that specifies the attributes of shareholders to the maximum possible extent, this paper indicated the following points.First, by examining the selecting stocks among institutional investors, we found that both domestic and foreign institutional investors not only make the selection based on companies f size and stock liquidity but also prefer high-quality stocks in terms of profitability, stability and financial soundness. In contrast, banks and insurance companies continue to invest in low-quality companies. Furthermore, compared with domestic institutional investors, foreign ones have a strong tendency to attach importance to formal governance features (size of the board of directors and presence or absence of outside directors). Foreign institutional investors also consistently have a strong home bias. Second, by testing the relationship between ownership and performance, we found that, whereas shareholder ownership by banks and insurance companies has negative effects on enterprise value and corporate earnings, share ownership by domestic and foreign institutional investors has positive effects. This finding indicates that even if a rise in domestic and foreign institutional investors f ownership ratio is based on an institutional investor bias or a home bias, or if the impact on the stock price is due to a demand shock, an increase in share ownership by domestic and foreign institutional investors will enable them to exercise the monitoring effect through actions such as indicating the possibility of an exit (possibility of selling off their holdings of shares) and voicing of complaints. Keywords: Ownership structure; investment criteria; corporate governance; corporate performance; institutional investors (search for similar items in EconPapers) Downloads: (external link) Related works: Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text Persistent link: https://EconPapers.repec.org/RePEc:mof:journl:ppr029a Access Statistics for this article More articles in Public Policy Review from Policy Research Institute, Ministry of Finance Japan Contact information at EDIRC. |
Is your work missing from RePEc? Here is how to contribute.
Questions or problems? Check the EconPapers FAQ or send mail to econpapers@oru.se.
EconPapers is hosted by the
School of Business at Örebro University.