Advanced Search
MyIDEAS: Login to save this paper or follow this series

Who Appoints Them, What Do they Do? Evidence on Outside Directors from Japan


Author Info

  • Yoshiro Miwa

    (Faculty of Economics, University of Tokyo)

  • J. Mark Ramseyer

    (Harvard Law School)


Reformists argue that Japanese firms maintain inefficiently few outside directors, while theory suggests market competition should drive firms toward their firm-specifically optimal board structure (if any). The debate suggests three testable hypotheses. First, perhaps board composition does not matter. If so, then firm performance will show no relation to board structure, but outsiders will be randomly distributed across firms. Second, perhaps boards matter, but many have suboptimal numbers of outsiders. If so, then firms with more outsiders should outperform those with fewer. Last, perhaps board matter, but market constraints drive firms toward their firm-specific optimum. If so, then firm characteristics will determine board structure, but firm performance will show no observable relation to that structure. To test these hypotheses, we assemble data on the 1000 largest exchange-listed Japanese firms from 1986-94. We first explore which firms tend to appoint outsiders to their boards, and find the appointments decidedly non-random: board composition matters. We then ask whether firms with more outside directors outperform those with fewer, and find that they do not: board composition is endogenous. As we find no robust evidence that board composition affects firm performance during either the thriving 1980s or the depressed early 1990s, we suspect that the optimal board structure may not depend on the macro-economic environment. We note that until recently courts effectively barred shareholder suits in Japan. We speculate that the much higher level of outside directors in the U.S. may have nothing to do with efficiency or monitoring. Instead, it probably reflects the way U.S. courts let firms use such directors to insulate the firm from extortionate but otherwise costly-to-defend self-dealing claims.

Download Info

If you experience problems downloading a file, check if you have the proper application to view it first. In case of further problems read the IDEAS help page. Note that these files are not on the IDEAS site. Please be patient as the files may be large.
File URL:
Download Restriction: no

Bibliographic Info

Paper provided by CIRJE, Faculty of Economics, University of Tokyo in its series CIRJE F-Series with number CIRJE-F-159.

as in new window
Length: 30 pages
Date of creation: Jul 2002
Date of revision:
Handle: RePEc:tky:fseres:2002cf159

Contact details of provider:
Postal: Hongo 7-3-1, Bunkyo-ku, Tokyo 113-0033
Phone: +81-3-5841-5644
Fax: +81-3-5841-8294
Web page:
More information through EDIRC

Related research


Other versions of this item:


No references listed on IDEAS
You can help add them by filling out this form.


Citations are extracted by the CitEc Project, subscribe to its RSS feed for this item.
as in new window

Cited by:
  1. Heechul Min, 2011. "Former Officials and Subsidies to State-owned Enterprises," Journal of Economic Development, Chung-Ang Unviersity, Department of Economics, vol. 36(2), pages 1-13, June.
  2. Otten, J.A. & Heugens, P.P.M.A.R., 2007. "Extending the Managerial Power Theory of Executive Pay: A Cross National Test," ERIM Report Series Research in Management ERS-2007-090-ORG, Erasmus Research Institute of Management (ERIM), ERIM is the joint research institute of the Rotterdam School of Management, Erasmus University and the Erasmus School of Economics (ESE) at Erasmus University Rotterdam.
  3. Sakawa, Hideaki & Ubukata, Masato & Watanabel, Naoki, 2014. "Market liquidity and bank-dominated corporate governance: Evidence from Japan," International Review of Economics & Finance, Elsevier, vol. 31(C), pages 1-11.


This item is not listed on Wikipedia, on a reading list or among the top items on IDEAS.


Access and download statistics


When requesting a correction, please mention this item's handle: RePEc:tky:fseres:2002cf159. See general information about how to correct material in RePEc.

For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: (CIRJE administrative office).

If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

If references are entirely missing, you can add them using this form.

If the full references list an item that is present in RePEc, but the system did not link to it, you can help with this form.

If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your profile, as there may be some citations waiting for confirmation.

Please note that corrections may take a couple of weeks to filter through the various RePEc services.