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Large Shareholders and Banks: Who Monitors and How?

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  • Yafeh, Yishay
  • Yosha, Oved
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    Abstract

    We investigate the nature of monitoring by stake holders using data on Japanese manufacturing firms. Shareholders and bank-centred corporate groups monitor firms by reducing activities with scope for managerial moral hazard such as advertising, R&D and entertainment expenses. Monitoring of this type takes place even when the monitored firm is not in financial distress. Although in Japan it is difficult to distinguish empirically between monitoring motivated by debt and monitoring motivated by equity stake, the data indicate that shareholders monitor firms continuously, while debt holders may intervene when firm performance is poor.

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    File URL: http://www.cepr.org/pubs/dps/DP1178.asp
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    Bibliographic Info

    Paper provided by C.E.P.R. Discussion Papers in its series CEPR Discussion Papers with number 1178.

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    Date of creation: May 1995
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    Handle: RePEc:cpr:ceprdp:1178

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    Related research

    Keywords: Banks; Japanese Corporate Groups; Large Shareholders; Managerial Moral Hazard; Monitoring;

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    Cited by:
    1. Cerasi, Vittoria & Daltung, Sonja, 2000. "The optimal size of a bank: Costs and benefits of diversification," European Economic Review, Elsevier, vol. 44(9), pages 1701-1726, October.
    2. Gorton, Gary & Kahl, Matthias, 2001. "The Scarcity of Effective Monitors and Its Implications For Corporate Takeovers and Ownership Structures," University of California at Los Angeles, Anderson Graduate School of Management qt2tj5w4mt, Anderson Graduate School of Management, UCLA.
    3. Akihiko Kawaura, 2004. "Deregulation and governance: plight of Japanese banks in the 1990s," Applied Economics, Taylor and Francis Journals, vol. 36(5), pages 479-484.
    4. Gary Gorton & Matthias Kahl, 2002. "The Scarcity of Effective Monitors and Its Implications For Corporate Takeovers and Ownership Structures," Center for Financial Institutions Working Papers 02-30, Wharton School Center for Financial Institutions, University of Pennsylvania.

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