Professionals On Corporate Boards In Japan: How Do They Affect The Bottom Line?

Mari Sako () and Katsuyuki Kubo
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Mari Sako: FFJ - Fondation France-Japon de l'EHESS - EHESS - École des hautes études en sciences sociales

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Abstract: Licensed professionals, such as accountants and lawyers, play a variety of roles when they sit on corporate boards. This paper sheds light on what role professional-directors play under what circumstances, and its consequences for corporate performance. We develop a theory that links professional roles (as cops, counsel, or entrepreneur) to antecedents in terms of external environment (notably the extent of government regulation) and to consequences for firm performance (profitability, corporate valuation, and stock return volatility). Using a data of all publicly quoted companies in Japan during 2004-2015, we demonstrate that the presence of professional-directors increases profitability and corporate valuation in all sectors, and that they contribute to higher stock return volatility in regulated and lower volatility in less regulated industries. The differential impacts of professional roles on firm performance – by acting as ‘entrepreneur' in regulated industries and as ‘cops' in non-regulated industries – have implications for board composition and board effectiveness. We provide discussion of the implications in the context of corporate governance reforms in Japan.

Keywords: professionals; lawyers; accountants; corporate governance; board of directors; actor-centered institutionalism (search for similar items in EconPapers)
Date: 2018-04-18
New Economics Papers: this item is included in nep-hrm
Note: View the original document on HAL open archive server: https://shs.hal.science/halshs-01770191
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