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Effects of Outside Directors on Firms' Investments and Performance: Evidence from a Quasi-Natural Experiment in Japan

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  • MORIKAWA Masayuki

Abstract

This study presents evidence on the impact of outside directors on firms' investment behavior and performance with a focus on the recent quasi-natural experiment that rapidly increased the number of outside directors in listed firms. Using a panel of Japanese firms, we compare listed and unlisted firms and conduct instrumental variable estimations to examine causal relationships. The results indicate that the rapid increase in the number of outside directors among listed firms did not promote active investments and risk-taking behavior. In addition, had no significant impacts on the profitability and productivity of the firms at least in the short run.

Suggested Citation

  • MORIKAWA Masayuki, 2019. "Effects of Outside Directors on Firms' Investments and Performance: Evidence from a Quasi-Natural Experiment in Japan," Discussion papers 19072, Research Institute of Economy, Trade and Industry (RIETI).
    • Handle: RePEc:eti:dpaper:19072
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    More about this item

    JEL classification:

    • D22 - Microeconomics - - Production and Organizations - - - Firm Behavior: Empirical Analysis
    • G34 - Financial Economics - - Corporate Finance and Governance - - - Mergers; Acquisitions; Restructuring; Corporate Governance
    • K22 - Law and Economics - - Regulation and Business Law - - - Business and Securities Law

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