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

Author

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  • 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.

Suggested Citation

  • Toru Yoshikawa & Phillip H. Phan, 2005. "The Effects of Ownership and Capital Structure on Board Composition and Strategic Diversification in Japanese Corporations," Corporate Governance: An International Review, Wiley Blackwell, vol. 13(2), pages 303-312, March.
  • Handle: RePEc:bla:corgov:v:13:y:2005:i:2:p:303-312
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    Citations

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    Cited by:

    1. Takahiro NISHI, 2015. "Corporate diversification and board composition in Japanese electronics corporations," International Journal of Business and Management, International Institute of Social and Economic Sciences, vol. 3(2), pages 27-44, May.
    2. 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.
    3. repec:eee:jbrese:v:81:y:2017:i:c:p:130-143 is not listed on IDEAS
    4. Mu-Shun Wang, 2016. "Idiosyncratic volatility, executive compensation and corporate governance: examination of the direct and moderate effects," Review of Managerial Science, Springer, vol. 10(2), pages 213-244, March.
    5. Jean McGuire & Sandra Dow, 2009. "Japanese keiretsu: Past, present, future," Asia Pacific Journal of Management, Springer, vol. 26(2), pages 333-351, June.
    6. Marie-Ann Betschinger, 2015. "Do banks matter for the risk of a firm's investment portfolio? Evidence from foreign direct investment programs," Strategic Management Journal, Wiley Blackwell, vol. 36(8), pages 1264-1276, August.
    7. Mu-Shun Wang, 2016. "Idiosyncratic volatility, executive compensation and corporate governance: examination of the direct and moderate effects," Review of Managerial Science, Springer, vol. 10(2), pages 213-244, March.
    8. 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.
    9. repec:hit:hcfrwp:2 is not listed on IDEAS
    10. Kathryn Harrigan, 2014. "Comparing corporate governance practices and exit decisions between US and Japanese firms," Journal of Management & Governance, Springer;Accademia Italiana di Economia Aziendale (AIDEA), vol. 18(4), pages 975-988, November.
    11. Singla, Chitra & George, Rejie & Veliyath, Rajaram, 2016. "Ownership Structure and Internationalization of Indian Firms," IIMA Working Papers WP2016-03-34, Indian Institute of Management Ahmedabad, Research and Publication Department.

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