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The impact of foreign investors on the risk-taking of Japanese firms

  • Nguyen, Pascal

Consistent with a bank-centered governance system, Japanese firms exhibit an exceptionally low level of performance variability. The increased involvement of foreign investors motivated by shareholder value is thus likely to have triggered a major shift in their risk-taking behavior. My results confirm this assumption as all standard measures of performance volatility appear to have significantly increased with the level of foreign ownership. Controlling for endogeneity provides higher point estimates supporting anecdotal evidence that foreign investors have targeted firms taking unusually low risk. Overall, the evidence highlights the considerable impact that this category of investors can have on a firm’s decisions and, by consequence, on its performance.

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Article provided by Elsevier in its journal Journal of the Japanese and International Economies.

Volume (Year): 26 (2012)
Issue (Month): 2 ()
Pages: 233-248

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Handle: RePEc:eee:jjieco:v:26:y:2012:i:2:p:233-248
Contact details of provider: Web page: http://www.elsevier.com/locate/inca/622903

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