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The Myth of the Main Bank: Japan and Comparative Corporate Governance

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  • Yoshiro Miwa

    (Faculty of Economics, University of Tokyo)

  • J. Mark Ramseyer

    (Harvard Law School)

Abstract

In this essay on Masahiko Aoki's recent study of Japanese corporate governance, we argue that he and others misdescribe Japan on several fundamental dimensions. First, Japanese firms and employees choose neither to arrange implicit life-time employment contracts nor to invest heavily in firm-specific skills. Instead, firms keep employees employed during economic downturns only because interventionist courts do not let them lay their employees off. Second, Japanese firms do not organize themselves into keiretsu corporate groups, do not exchange shares with other alleged group members, and do not necessarily use the money-center bank attributed to the group as their "main bank." Last, Japanese "main banks" neither agree in advance to rescue troubled debtors nor monitor firms on behalf of other creditors.

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Bibliographic Info

Paper provided by CIRJE, Faculty of Economics, University of Tokyo in its series CIRJE F-Series with number CIRJE-F-131.

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Length: 19 pages
Date of creation: Sep 2001
Date of revision:
Handle: RePEc:tky:fseres:2001cf131

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  1. Bengt Holmstrom, 1981. "Moral Hazard in Teams," Discussion Papers 471, Northwestern University, Center for Mathematical Studies in Economics and Management Science.
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  8. Ramseyer, J Mark & Nakazato, Minoru, 1989. "The Rational Litigant: Settlement Amounts and Verdict Rates in Japan," The Journal of Legal Studies, University of Chicago Press, vol. 18(2), pages 263-90, June.
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  15. Aoki, Masahiko, 1990. "Toward an Economic Model of the Japanese Firm," Journal of Economic Literature, American Economic Association, vol. 28(1), pages 1-27, March.
  16. Miwa, Yoshiro & Ramseyer, J. Mark, 2006. "The Fable of the Keiretsu," University of Chicago Press Economics Books, University of Chicago Press, edition 0, number 9780226532707.
  17. Milgrom, Paul & Roberts, John, 1994. "Complementarities and systems: Understanding japanese economic organization," Estudios Económicos, El Colegio de México, Centro de Estudios Económicos, vol. 9(1), pages 3-42.
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Citations

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Cited by:
  1. Joe Peek & Eric S. Rosengren, 2003. "Unnatural Selection: Perverse Incentives and the Misallocation of Credit in Japan," NBER Working Papers 9643, National Bureau of Economic Research, Inc.
  2. Asli Colpan, 2008. "Are strategy-performance relationships contingent on macroeconomic environments? Evidence from Japan’s textile industry," Asia Pacific Journal of Management, Springer, vol. 25(4), pages 635-665, December.
  3. Yishay Yafeh, 2002. "An International Perspective of Japan's Corporate Groups and their Prospects," NBER Working Papers 9386, National Bureau of Economic Research, Inc.

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