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

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  • Morck, Randall
  • Nakamura, Masao

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.

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File URL: http://hermes-ir.lib.hit-u.ac.jp/rs/bitstream/10086/13876/1/wp2004-4a.pdf
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Bibliographic Info

Paper provided by Center for Economic Institutions, Institute of Economic Research, Hitotsubashi University in its series CEI Working Paper Series with number 2004-4.

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Length: 154 p.
Date of creation: Mar 2004
Date of revision:
Handle: RePEc:hit:hitcei:2004-4

Note: First draft, September 29th 2002; This draft, July 2nd 2003
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  1. Boot, Arnoud W A & Thakor, Anjan, 1997. "Can Relationship Banking Survive Competition?," CEPR Discussion Papers 1592, C.E.P.R. Discussion Papers.
  2. Raghuram G. Rajan & Luigi Zingales, 2001. "The Great Reversals: The Politics of Financial Development in the 20th Century," NBER Working Papers 8178, National Bureau of Economic Research, Inc.
  3. Kevin C. Murdock & Thomas F. Hellmann & Joseph E. Stiglitz, 2000. "Liberalization, Moral Hazard in Banking, and Prudential Regulation: Are Capital Requirements Enough?," American Economic Review, American Economic Association, vol. 90(1), pages 147-165, March.
  4. Tetsuji Okazaki, 1999. ""Economic History of the Holding Company: Zaibatsu and Corporate Governance"(in Japanese)," CIRJE J-Series CIRJE-J-9, CIRJE, Faculty of Economics, University of Tokyo.
  5. Takeo Hoshi & Anil Kashyap, 2004. "Corporate Financing and Governance in Japan: The Road to the Future," MIT Press Books, The MIT Press, edition 1, volume 1, number 0262582481, December.
  6. Okazaki Tetsuji, 1993. "The Japanese Firm under the Wartime Planned Economy," Journal of the Japanese and International Economies, Elsevier, vol. 7(2), pages 175-203, June.
  7. Claessens, Stijn & Djankov, Simeon & Lang, Larry H. P., 2000. "The separation of ownership and control in East Asian Corporations," Journal of Financial Economics, Elsevier, vol. 58(1-2), pages 81-112.
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Cited by:
  1. Chisari, Omar O. & Ferro, Gustavo, 2009. "Gobierno Corporativo: los problemas, estado actual de la discusiĆ³n y un ejercicio de mediciĆ³n para Argentina
    [Corporate Governance: the problems, the current stage of the discussion and a measure
    ," MPRA Paper 15630, University Library of Munich, Germany.
  2. Teranishi, Juro, 2005. "Investor Right in Historical Perspective: Globalization and the Future of the Japanese Firm and Financial System," CEI Working Paper Series 2004-21, Center for Economic Institutions, Institute of Economic Research, Hitotsubashi University.

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