Working Paper: NBER ID: w23812
Authors: Hideaki Miyajima; Ryo Ogawa; Takuji Saito
Abstract: We examine the turnover of top executives in Japanese firms throughout the period from 1990 to 2013. During this time, the presence of a main bank has been weakened, the ownership of institutional investors has dramatically increased, and independent outside directors have been introduced in many firms. We find that top executive turnover sensitivity to corporate performance has not changed, although return on equity (ROE) and stock returns displace return on assets (ROA) as performance indicators that turnover is most sensitive to. The evidence also indicates that instead of the main bank, foreign institutional investors have begun to play an important governance role in Japan. However, the main bank does not abandon its governance role. While the scope of the main bank’s authority may have substantially contracted, main banks continue to perform a certain role in disciplining management.
Keywords: corporate governance; executive turnover; Japan
JEL Codes: G34; G38; K22
Edges that are evidenced by causal inference methods are in orange, and the rest are in light blue.
| Cause | Effect |
|---|---|
| Corporate governance changes (foreign institutional investors) (G38) | Sensitivity of top executive turnover to ROE (M12) |
| Decline in industry-adjusted ROA by one standard deviation (L69) | Probability of forced turnover increases by approximately 2% (J63) |
| Sensitivity of top executive turnover to ROE increases (M12) | Governance structures evolve (H11) |
| Governance changes (G38) | More performance-sensitive turnover mechanism (J62) |
| Increase in sensitivity to ROE (C20) | Increase in forced turnover rates (J63) |
| Independent outside directors influence turnover sensitivity (G34) | Turnover sensitivity changes (J63) |