Been There, Done That: The History of Corporate Ownership in Japan

Randall Morck, Masao Nakamura, 政男 中村 and マサオ ナカムラ

No 2004-4, CEI Working Paper Series from Center for Economic Institutions, Institute of Economic Research, Hitotsubashi University

Abstract: Japan's corporate sector has, at different times in recent history, been organized according to every major model. Prior to World War II, wealth Japanese families locked in their control over large corporations by organizing them into pyramidal groups, called zaibatsu, similar to structures currently found in Canada, France, Korea, Italy, and Sweden. In the 1930s, the military government imposed a centrally planned command economy, with private property rights retained as little more than a legal fiction. The American occupation force replaced this with a widely held corporate sector similar to that of the United Kingdom and United States. A bout of takeovers and greenmail ensued. To defend their positions, Japanese top executives placed small numerous blocks of stock with each others' firms, creating dense networks of small intercorporate blocks that summed to majority blocks in each firm. These networks, called keiretsu, halted hostile takeovers completely. Although their primary functions were to lock in corporate control rights, both zaibatsu and keiretsu were probably also rational responses to a variety of institutional failings. Successful zaibatsu and keiretsu were enthusiastic political rent-seekers, raising the possibility that large corporate groups are better at influencing government than free standing firms. In the case of keiretsu especially, this rent seeking probably retarded financial development and created long-term economic problems.

Pages: 157 pages
Date: 2004-03
Note: First draft, September 29th 2002; This draft, July 2nd 2003
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Citations: View citations in EconPapers (3)

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