IDEAS home Printed from
   My bibliography  Save this paper

Business Unit Governance in Japan: Focusing on corporate boundaries and two-layer agency relationships (Japanese)


  • AOKI Hideaki
  • MIYAJIMA Hideaki


With the diversification and globalization of Japanese companies in recent years, their business portfolios have become more complex, and the grouping of companies has progressed via carve-outs and M&As. As a result, adequate control of business units by headquarters (business unit governance) has grown in importance. Meanwhile, as organizational structures have become more decentralized, companies have to face two-tier agency relationships in corporate governance—the traditional agency relationship between shareholders and managers and the increasing number of agency relationships between headquarters' managers and divisional managers or between a parent company and its subsidiaries. In this paper, we analyze the current practice of business governance, from the viewpoints of authority delegation and monitoring of business units. We use a survey on corporate diversification and the governance conducted by RIETI in April 2007, targeting the firms listed on the First Section of the Tokyo Stock Exchange (excluding financial and insurance companies). Through our analysis, we found that more authority was delegated to the wholly owned subsidiaries than to the in-house business units. Furthermore, we show that there was significant complementarity between the delegation of authority and monitoring of in-house business units, while that between the delegation of authority and wholly owned subsidiaries was not found. With respect to two-tier agency relationships, we illustrate that companies under stronger pressure from the capital market or those more actively reforming their board of directors are likely to monitor their business units more strictly.

Suggested Citation

  • AOKI Hideaki & MIYAJIMA Hideaki, 2010. "Business Unit Governance in Japan: Focusing on corporate boundaries and two-layer agency relationships (Japanese)," Discussion Papers (Japanese) 10057, Research Institute of Economy, Trade and Industry (RIETI).
  • Handle: RePEc:eti:rdpsjp:10057

    Download full text from publisher

    File URL:
    Download Restriction: no

    References listed on IDEAS

    1. Andrei Shleifer & Florencio Lopez-de-Silanes & Rafael La Porta, 2008. "The Economic Consequences of Legal Origins," Journal of Economic Literature, American Economic Association, vol. 46(2), pages 285-332, June.
    2. Michel Aglietta & Antoine Rebérioux, 2005. "Corporate Governance Adrift," Books, Edward Elgar Publishing, number 3675.
    3. Nicholas Bloom & John Van Reenen, 2007. "Measuring and Explaining Management Practices Across Firms and Countries," The Quarterly Journal of Economics, Oxford University Press, vol. 122(4), pages 1351-1408.
    4. Julian FRANKS & Colin MAYER & MIYAJIMA Hideaki, 2009. "Equity Markets and Institutions: The case of Japan," Discussion papers 09039, Research Institute of Economy, Trade and Industry (RIETI).
    5. Hall, Peter A. & Gingerich, Daniel W., 2004. "Varieties of Capitalism and Institutional Complementarities in the Macroeconomy," MPIfG Discussion Paper 04/5, Max Planck Institute for the Study of Societies.
    6. Henry Hansmann & Reinier Kraakman, 2000. "The End Of History For Corporate Law," Yale School of Management Working Papers ysm136, Yale School of Management, revised 01 Feb 2001.
    7. Rafael La Porta & Florencio Lopez-de-Silanes & Andrei Shleifer & Robert W. Vishny, 1998. "Law and Finance," Journal of Political Economy, University of Chicago Press, vol. 106(6), pages 1113-1155, December.
    8. Streeck, Wolfgang & Thelen, Kathleen (ed.), 2005. "Beyond Continuity: Institutional Change in Advanced Political Economies," OUP Catalogue, Oxford University Press, number 9780199280469.
    9. Rajan, Raghuram G, 1992. " Insiders and Outsiders: The Choice between Informed and Arm's-Length Debt," Journal of Finance, American Finance Association, vol. 47(4), pages 1367-1400, September.
    10. Nicholas Bloom & Christos Genakos & Raffaella Sadun & John Van Reenen, 2011. "Management Practices Across Firms and Countries," CEP Discussion Papers dp1109, Centre for Economic Performance, LSE.
    11. Andrei Shleifer, 2009. "The Age of Milton Friedman," Journal of Economic Literature, American Economic Association, vol. 47(1), pages 123-135, March.
    12. Takeo Hoshi & Anil Kashyap & David Scharfstein, 1993. "The Choice Between Public and Private Debt: An Analysis of Post-Deregulation Corporate Financing in Japan," NBER Working Papers 4421, National Bureau of Economic Research, Inc.
    13. Masahiko Aoki & Gregory Jackson, 2008. "Understanding an emergent diversity of corporate governance and organizational architecture: an essentiality-based analysis -super-1," Industrial and Corporate Change, Oxford University Press, vol. 17(1), pages 1-27, February.
    14. Boyan Jovanovic & Peter L. Rousseau, 2002. "The Q-Theory of Mergers," American Economic Review, American Economic Association, vol. 92(2), pages 198-204, May.
    15. Park, Kwangwoo, 2002. "Foreign Ownership and Firm Value in Japan," CEI Working Paper Series 2002-15, Center for Economic Institutions, Institute of Economic Research, Hitotsubashi University.
    Full references (including those not matched with items on IDEAS)

    More about this item

    NEP fields

    This paper has been announced in the following NEP Reports:


    Access and download statistics


    All material on this site has been provided by the respective publishers and authors. You can help correct errors and omissions. When requesting a correction, please mention this item's handle: RePEc:eti:rdpsjp:10057. 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: (KUMAGAI, Akiko). General contact details of provider: .

    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.

    We have no references for this item. You can help adding them by using 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 RePEc Author Service 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.

    IDEAS is a RePEc service hosted by the Research Division of the Federal Reserve Bank of St. Louis . RePEc uses bibliographic data supplied by the respective publishers.