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The Effects of Ownership and Capital Structure on Board Composition and Strategic Diversification in Japanese Corporations

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Author Info

  • Toru Yoshikawa

    ()
    (School of Business, Singapore Management University.  toru@smu.edu.sg)

  • Phillip H. Phan

    (Lally School of Management and Technology, Rensselaer Polytechnic Institute, Troy, NY, USA.)

Abstract

The board of directors plays an important role in solving the agency problem between shareholders and management. This paper investigates the relationships between ownership and board structure with the diversification strategy of large Japanese firms. The results show that corporate nominee directors are associated with lower levels of product diversification of their investee firms. This suggests that nominee directors in large Japanese corporations see themselves representing specific interests and therefore investors should pay attention to board composition in order to assess the level of protection they can expect to receive. Even without any apparent agency problem with management, there remains a potential "principal-principal" problem. Copyright Blackwell Publishing Ltd 2005.

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Bibliographic Info

Article provided by Wiley Blackwell in its journal Corporate Governance: An International Review.

Volume (Year): 13 (2005)
Issue (Month): 2 (03)
Pages: 303-312

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Handle: RePEc:bla:corgov:v:13:y:2005:i:2:p:303-312

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Cited by:
  1. George, Rejie & Kabir, Rezaul, 2012. "Heterogeneity in business groups and the corporate diversification–firm performance relationship," Journal of Business Research, Elsevier, vol. 65(3), pages 412-420.
  2. repec:hit:hcfrwp:2 is not listed on IDEAS
  3. Jean McGuire & Sandra Dow, 2009. "Japanese keiretsu: Past, present, future," Asia Pacific Journal of Management, Springer, vol. 26(2), pages 333-351, June.
  4. Jais, Mohamad & Abdul Karim, Bakri & Funaoka, Kenta & Abidin, Azlan Zainol, 2009. "Dividend Announcements and Stock Market Reaction," MPRA Paper 19779, University Library of Munich, Germany.

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