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Internal Promotion and the Effect of Board Monitoring: A Comparison of Japan and the United States

Meg Sato

Asia Pacific Economic Papers from Australia-Japan Research Centre, Crawford School of Public Policy, The Australian National University

Abstract: This paper analyses two pronounced features of Japanese corporate governance--large corporate boards almost entirely composed of insiders and the tendency to appoint CEOs through internal promotions. It is often argued that Japanese boards are less effective in monitoring CEOs than U.S. boards which tends to be composed of a small number of directors, majority of which are outsiders. I show that Japanese corporate governance exhibits less inefficiencies than U.S. corporate governance. I further discuss the recent changes in Japanese corporate governance and provide theoretical explanation that they do not necessarily enhance board monitoring.

JEL-codes: G30 K22 P51 (search for similar items in EconPapers)
New Economics Papers: this item is included in nep-bec and nep-cfn
Date: 2010
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https://crawford.anu.edu.au/pdf/pep/apep-387.pdf (application/pdf)

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Persistent link: https://EconPapers.repec.org/RePEc:csg:ajrcau:387

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